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Rebel leader in 
armour, Page 18 

No. 30,239 


Thursday May 21 1987 


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World news 

US will 

The US said its warships would 
stay in the Gulf to protect Kuwaiti 
tankers despite a missile attack on 
the US frigate Stark zn which at 
least 37 American sailors riinri 
The State Department said plans 
were going ah<wrf to put II of Ku- 
wait's 22 tankers under the Ameri- 
can flag from next month, sniffling 
them to US Navy escort in the Gulf. 

Meanwhile the White House dis- 
closed that US nTfietahi had asked 
that SaudKArabian F-15 fi g h te r air- 
craft intercept the Iraqi aircraft af- 
ter it attacked the US frigate but a 
Saudi ground controller did not 
have authority to order them to do 

FIJI violence 

Fiji's . Governor-General ordered 
troops to quell outbreaks of racial 
violence. Formation of an interim 
government, following the coup fai- 
lure, was delayed. Rige 18 

Contras driven back 

Nicaragua's army, in its biggest op- 
eration, has driven back hundreds 
of Contra rebels into neighbouring 
Honduras muj a rebel 

rump Fhge4 . 

Sri Lanka alert 

Sri T-nnfca saat ; up : to 2j)00 fresh 
troops to the Jaffna peninsula, rais- 
ing speculation that the Govern- 
ment might be planning an offen- 
sive against "the -Tamil rebel 

Intelsat toeue 

Inte hwi hag SlfttLadpflsi^ against 
its former dired^gme^liichard 
Colino, torecowfoodstfpalleged- 
Jy fraadateuBy'-^SM^'fem the 

gtpfrul « yammiTn<»»tffii%«'~ ^lfmp. The. 

complaint in USIfedarofrCburt said 
the ]hte™«teteiT' TW*«M™™ndca- 
tioss SatelHte OgganasatkHi sot. 
fered losses off 

Indian space hitch : 

A seven-nation embargo on exports 
of components for-longranga rodt- 
ets could affect India's space pro- 
gramme, an official said. - . 

Secrets ‘sold 1 

Four Japanese were arrested for 
selling secret US military informa- 
tion to the Soviet Union. The case 
was being treated as theft, not espi- 

Flight strike 

Flight attendants of Spain’s state- 
owned Aviaco domestic airline be- 
gan a three-day strike over pay. 

Libyan shot 

A former aide of Libyan l e ader Mu- 
ammer Gadaffi was shot and 
wounded in a central Vienna street 
His attacker dropped a Libyan dip- 
lomatic passport. 

Kenya border ‘shut 1 

The Ugandan Government said 
Kenya had unilaterally closed its 
border with Uganda but Kenyan af- 
lidats said the border was stdl open 
although they were applying tight 
controls bn people entering from 

Tax reform urged 

French Budget Minister Alain 
Juppe called for sweeping reform of 
France’s system erf indirect taxes 
before the European Community in- 
troduces a unified market In five 
years' time. 

Transplant bill 

Singapore's Parliament approved a 
bill allowing doctors to remove kid- 
neys from dead accident victims for 

Dentist’s downfall 

Swedish health authorities said 
they were considering an upper age 
limit for dentists after a patient of 
an 81-ytraraM dentist complained 
be had failed to find more than two 
dozen cavities. 

Business summary 


with SAS 

SABENA, Belgian national airline, 
and Scandinavian Airlines System 
(SAS) came closer to realising their 
much mooted merger when Sabena 
confirmed it was actively pursuing 
the link. It said the move would not 
include any other related activities, 
such as Sabena’s hotels and cater- 
ing operationJtage 1&. - 
BANQUE Nationale de Paris, 
Frances largest bank, is to centre 
; its major equity holdings oh its sub- 
sidiary Compagnie dTnvestisse- 
ment de Paris. Page 20 

TOKYO: US bank Gtkmp’s deci- 
sion, to add S3bn to its loan loss re- 
serve against Third World debts 
jarred the market and heavy selling 
of fiwMTirirf issues drove prices 
sharply lower. The Nikkei Avenge 
lost 65828 to 23,419.60, the second 
biggest daffy loss. Page 42 

WALL STREET: The Daw Joses in- 
dustrial average dosed 5.41 down at 
221527. Page 42 

COCOA prices edged below the In- 
ternational Cocoa Organisation’s in- 
tervention support leveL The Lon- 
don July position was £13 down at 
£1255198 a tonne, a one-year low. 
Page 3d 

LONDON: Bank shares phmgedfol- 
- lowing (be news regacdaig Qt- 
icorp’&debt write-off, tori tire, latest, 
opunon poll indicating a narrowing 
in. the Conservative Party's lead in 
the general el ect i on campaign. The 
FT-SE lOOindex closed 402 down at 
2174.0, and the FT Ordinary lost 
282 to 169020. DetaOs, Page 38 . 
GOLD rose 3525 to 347525 on the 
London bnllioa market In Enrich it 
rose to S476.75 (347025). Page 30 

DOLLAR closed in New York MI 
L75; SFr 1.456; at FFr 52345; and 
Y139.75. It fen in London to DM 
1.7745 (DM L7780); to FFr 52350 
(FFr 52475); to SFr L4540 (SFr 
L4560);and to Y13920 (714020). On 
Bank of Fpgtend figures the dol- 
lar's exchange rate index fdl 02 to 
99.7. Page 31 

STERLING dosed in New York at 
$1281. It rose in london to $12835 
(312830); but fcfl to Dm 22875 (DM 
22X15); to FFr 92925 (FFr 1021); to 
SFr 14475 (SFr 2.4550); and to 
Y23S25 (Y23520). The pound’s ex- 
change rate index fell 02 to 73.7. 

DAIMLER-BENZ the West Ger- 
man vehicle group which has diver- 
sified into electronics, aerospace 
and engines, plans to invest up to 
DM24bn (S13L5bn) over the next five 
years, most of it in the car sector. 
Page 28 

VOLVO, the Swedish automobile, 
energy and food group, suffered 
lower profits in toe first quarter, hit 
iqr the tower dollar and higher prod- 
uct devekflunent costs. Profits, after 
financial items, fan 18 per 
Page 20 

SOUTH KOREA said it would res- 
train shipment of video cassette re- 
corders and nine other items to the 
US market to take effect from July 


Hyssrsr.HK Tjmrifishank (Hdabak 
West Germany’s fourth largest pub- 
licly owned bank, reports a 122 pm 
emit fan in operating profits far 
1988 to DM 243m (S137m) against 
DM 278m in 1985-Page 19 

FKAN(^^ Council ofMinisters ap- 
proved the hill which will hand con- 
trol of Credit Agricole, the country’s 
giant agricultural bank back from 

the state to the regional banks 
which are its members. Page 23 

Wall Street analysts surprised by size of provision but welcome decision 

US banks may follow Citicorp 
move to cut debt exposure 


THE US WpaTw-ial mmr mini f y ypq. 

terday welcomed Citicorp’s dramat- 
ic decision to reduce the value of its 
S15bn Third World debt exposure 
by a quarter and takp a $Z5bn sec- 
ond quarter loss. 

Analysts suggested that other 
major US money centre banks 
would be forced to take similar ac- 
tion. While many banks refused to 
comment cm the Citicorp move. 
Man uf act urers Hanover acknowl- 
edged that it might fallow Citicorp's 


• Argentine debt accord; loan markets emerge from twiBght, 
Page 4 

• Editorial comment; Ekpmsfva path for other banks, Page 16 

• Banks face the fact, Page 17 

• Lax, Page 1$ 

The shares of Citicorp, the big- 
gest US banking group and the 
largest international bank, rose by 
$2n to dose at $53% yesterday fol- 
lowing the announcement that the 
group was increasing its loan, loss 
reserve by S3bn to £5bn and expect- 
ed to report a net loss of around 
Slbn for 1987. 

Although the move will cut the 
book value of CStibocp'c shares by 
around a third, analysts were 
pleased that the bank was address- 
ing n-pm hlam n htrii Tins depressed 
the share price of all of the US mon- 
ey centre banks since the onset of 
toe Thir d World debt crisis in 1982. 

“It is the recognition of the prob- 
lem that makes the difference,” 
said one analyst, who argued that 
“nuAf t more comfortable 

when a company owns up to its 
problems. 11 

However, the magnitude of Citi- 
corp’s actions surprised Wall Street 
analysts ™H although the group 
stressed that it was not aiming to 
set a standard for the rest of the US 
banking industry, most Wall Street 
analysts believe that rival bankers 
will not be able to ignore Citicorp’s 

Most of the major US money cen- 
tre bunks refused to comment pub- 
licly on Gtiomp’s move yesterday 
although they admitted privately 
that their senior executives had 
been working late into Tuesday 
night reviewing the implications of 
a similar move on their own bal- 
ance sheets. 

The main exceptions were two of 
the weaker members of the US 
banking community. BaT»VAim»ri«i 
Corporation, which has been buffet- 
ted by heavy loan losses over the 
last few years and was forced to 
omit its dividend last year, indicat- 

ed that it did not intend to increase 
its loan loss reserve, which at 3.17 
per cent is the highest of any major 
bank save Citicorp, whose reserve 
now stands at 3.7 per emit of total 

BankAmerica said that its loan 
loss reserves “are appropriate for 
the asset mix in its overall portfolio. 
We are aware of no developments 
which would produce a need for ad- 
justments to tiiis reserve". 

However, Manufacturers Han- 
over Corporation, the third most 
heavily exposed US bank, indicated 
that rt might follow Citicorp’s exam- 
ple. The action taken by Citicorp 
yesterday is an option that has 
been examined carefully by virtual- 
ly all major US participants in the 
sovereign debt process, including 
Manufacturers Hanover. This op- 
tion wQl be even more intensely re- 
viewed in the aftermath of Cit- 
icorp's decision”, said Manufactur- 
ers Hanover 

Bankers said that if the stock 

markets and world money markets 
.responded favourably to Citicoip's 
move it would increase the likeli- 
hood of similar actions to effective- 
ly writeoff part of toe banks' trou- 
bled Third World loans. However, 
several analysts noted that only a 
few major US banks could afford to 
take as sweeping action as Citicorp. 

Outside the banking sector reac- 
_ tion to the Citicorp move was 
mixed. In Washington yesterday 
the recently appointed deputy sec- 
retary of the Treasury Mr Peter 
McPherson praised the decision as 
“a positive development? and said it 
would assist the Reagan Adminis- 
tration’s strategy for resolving the 
Third World debt problems. 

But some officials expressed 
guarded concern on this score argu- 
ing that Citicorp had simply rear- 
ranged its balance sheet, not 
strengthened its capital base. 

They also argued that there was 
the risk that developing countries 
would look at the bank's increased 
reserves as an invitation to adopt a 
tougher negotiating stance on the 
grounds that the bank was now pre- 
pared to take losses which could re- 
sult in a more confrontational at- 
mosphere on Third World debt is- 
sues, which in turn could produce 
further losses. 

Shares fall in nervous markets 


WORLD stock markets reacted ner- would- sanction higher interest 
voualy yesterday as CSticoxp's ded- rates, so intensifying fumfing prob- 
sion to bolster its loan loss reserves lems for heavily exposed banks and 
raised renewed fears about bank threatening a har d e nin g of posi- 
exposure to Third World debtors, tions among debtor countries. 

Shares in the Far East and in Eo- On the other h and , financ i al mar- 

rope suffered heavy losses, air **te appear to fed the Fed must 
though on Wall Street the mood react decisively to growing fears of 
was calmer yesterday following the hitter inflation and restore coofi- 
sharp igwgpff sustained on Tuesday deuce in the dollar, 
on rumours of the Citicorp move. The dear losers on the day were. 
The Dow Joott mrfn^rial overage banking shares, hit by concerns 

nanrial sector. 

In London, bank shares fell shar- 
ply at the opening and negative sen- 
timent was reinforced by a Bank of 
England statement which said it ex- 
pected a continuing increase in the 
level of provisions at British hanirc 
Lloyds Bank, with heavy Lati n 
American debt exposure, was parti- 

Wall Street was more resilient 
andwas at-midsepsion, part- 

slipped by a riy ;H41 to dale at that other banks could come under jy reassured by the steadiness of 
r 221527 yesterday, compared with a pressure to follow Citicorp's move the dollar. 

fall of more than 37 points on Tues- 
day. However, tra ding , remained 
relatively subdued. 

The Citicorp news came with fi- 
nancial markets already jittery 
about stoggishgrbwth and rising in- 
flation in the US and the continuing 
weakness of the dollar. 

The major talking paint in the 
markets has been the EkeKhood of 
a fresh US discount rate rise to bol- 
ster the dollar. US band yields have 
risen sharply in recent weeks as the 
dollar remained weak. 

The fresh focus on world debt 
problems because of Citicorp’s an- 
nouncement yesterday cast doubt 
on whether the US Federal Reserve 

and therefore announce lower prof- 

The news prompted heavy s elling 
of financial issues on the Tokyo 
stock market The Nikkei average 
dropped 6532B points to 23,41920, 
its second largest daily loss. - 

The losses woe concentrated is 
shares of him ire with large outstan- 
ding loans to developing countries 
although securities houses were al- 
so depressed by news that the To- 
kyo stock exchange will cut the 
commissions they charge on stock 
{failings later thfa year. 

The same pattern could be seen 
in bourses around Europe most of 
all saw losses concentrated in the fi- 

In bond markets, Citicorp's an- 
nouncement prompted an immedi- 
ate flight by investors from bank- 
related securities, although dealers 
said that this initial reaction ap- 
peared to have moderated later in 
the day on reflection of the move. 

Bond investors were apparently 
concerned initially that the Citicorp 
move represented a deterioration of 
the Third World debt crims, that 
would prompt the US Federal Re- 
serve to adopt a more accommoda- 
tive, and potentially inflationary, 
stance toward interest rates. 

On reflection, the move was seen 
by some as perhaps clearing the 
way to more radical solutions for 


FT Ordnary Share 



FT-A Banks f 

Max Mr\ 






JT Nikkei Dow \ 

V~ Average 1 

MAY 1987 20 

the crisis, and could not be said to 
worsen it 

The initial flight to quality was 
reflected in a decline in US Treasu- 

Cozrtiniied on Page 18 

Money markets. Page 31; 
Eurobonds, Pbge 23; London 
Stock exchange. Page 38 

Bank of 
calls for 

By David Lancet les 
in London 

THE Bank of England yesterday 

took the unusual step of publicly 
urging UK banks to press ahead 
with their efforts to raise their 
provisions against sovereign 

In a statement prepared in the 
wake of the Citicorp announce- 
ment, the Bank said that it “ex- 
pects the level o{ provisions to 
continue to increase." 

Although the Bank made no 
direct reference to Citicorp, it 
said: “Doubtless bank boards 
win take into account as they re- 
view the position a variety of 
considerations including the 
evolving pattern of proviston- 
making in banks elsewhere.” 

The decision by the Bank to re- 
spond publicly to events was tak- 
en by the banking industry to in- 
dicate the authorities’ continuing 
concern about the danger of loss 
facing UK banks, even though 
their exposure to Latin American 
defat is not relatively as great as 
that of the US banks. 

However, neither the Bank nor 
UK bankers were expecting any 
British banks to follow Citicorp’s 
example and make a large once- 
for-all provision. 

In its statement, the Rank 
stressed that consideration of 
provisions should be a continu- 
ous process which takes account 

nf changing mndilimit 

The Bank also noted that Brit- 
ish banks had already made 
significant increases in their pro- 
visions, and had also tafcan steps 
to strengthen their capitaL 

UK clearing bankers said yes- 
terday that Citicorp's dramatic 
decision to transfer S3bn to its 
loan loss reserve would ensure 
that British banks remained un- 
der pressure to bolster their re- 
serves as weD, though the impact 
would not be measurable until 
the banks produced their interim 
results in the summer. 

Analysts esti m ated that it 
would cost UK hanks up to 
£L5bn (3223m) to match the lev- 
el of reserves against Third 
World debt set by Citicorp, and 
this would cause a severe drop in 
earnings, even losses, if U were 
done in less than a year. 

Among (he dearers. Midland 
Bank aim Lloyds Bank have the 
largest exposure to Latin Ameri- 
ca. followed by Barclays and 

S. Africa 
kills 3 

By Anthony Robinson 
In Johannesburg 

THREE white South African police- 
men were killed and 10 people were 
badly injured when two powerful 
car bombs exploded outside the Jo- 
hannesburg Magistrates Court just 
before lunchtime yesterday. 

The blasts occurred on the fourth 
anniversary of South Africa’s worst 
terrorist attack, when a car bomb 
explosion outside airforce head- 
quarters in Pretoria killed 19 peo- 
ple, including the two men priming 
the bomb. 

Yesterday’s twin explosions, only 
minutes apart, followed a smaller 
bomb explosion at the central Carl- 
ton Hotel late on Tuesday night in 
which nobody was injured. 

The latest explosions occurred 
hours after hundreds of police con- 
ducted a predawn, door-to-door 
search through a block of flats rent- 
ed mainly to illegal black residents 

in the formally white inner-city 
area of Hillbrow. They also arrested 
14 black students from Witwaters- 
rand University after early morning 
raids on three university resi- 

POUce questioned all the illegal 
fiat tenants about their identities, 
provoking fears that the raids were 
the precursors of a dampdown on 
violations of the Group Areas Act 
following the right-wing swing in 
this month's whites-only elections. 
A police statement said they were 
searching for people in connection 
with recent bomb explosions, in- 
cluding those which severely dam- 
aged Cosatu House, headquarters 
of the Congress of South African 
Trade Unions two weeks ago. 

In a separate incident yesterday, 
police shot dead a black gold minpr 
during a confrontation between po- 
lice and 5,000 striking miners at 
Gencor's West Rand Consolidated 
mine near Krugersdorp. The strike 
began on Monday over production 
bonuses and closure of the National 
Union of Mineworfcers’ office on 
mine property. 

The renewed violence provided t 
sombre backdrop to the no-conf ’ 
dence debate in the Cape Town 
Parliament, where Dr A nd ri es 
Treuznicht, leader of the official op- 
position Conservative Party, reject- 
ed the Government's vague power- 
sharing plans and called for the es- 
tablishment of “a free white nation ’ 
under its own government in its 
own fatherland.” 

He ridiculed what he called the 
Government's belief that “we can 
buy off revolutionary political de- 
mands with better living condi- 
tions" and said the Government’s 
powersharing policy would lead to 
a toss of white power, white identity 
and swamping by the blac k majori- 
ty in a unitary state. 

Continued on Page 18 

Japan considers proposal for 
international chip trade pact 


JAPAN is conskiering proposals for 
a new international semiconductor 
trade agreement which could re- 
place or augment the beleaguered 
bilateral US- Japan semiconductor 
trade pact 

Government and Indus* 

fry executives are i understood to be 
discussing two initiatives aimed at 
monitoring global semiconductor 
trade with an eye to including Euro- 
pean «tH South-East Asian coun- 
tries in an intenational trade pact 

US industry and government offi- 
cials said that the reported propos- 
als appeared to do little more than 
the position adopted by Ja- 
pan in tpRnc that fed to fbS ri gnrng 

of the US-Japanese s emic o nduc tor 
trade agreement last year , ami that 
they would meet with strong resis- 
tance in the US. 

The impetus tor a new semicon- 

rif faring a call fer a multinational 
agreement the General 

Agreement on Tariffs and Trade 

(GATT} or the establishment of a 
floor price system tar semiconduc- 
tors worldwide. 

The latter proposal, it is under- 
stood, is currently irnrtw discussion 
between European and Japanese 
semiconductor companies. 

Japanese government officials, 
however, are extremely reluctant to 
discuss the new proposals publicly, 
because the country is currently en- 
gaged in extremely delicate nego- 
tiations with the US on the US-Ja- 
pan semiconductor trade pact 
signed last autumn. That pact has 
been sorely strained since early 
♦his year, when the US claimed that 
Japan was not honouring its com- 
mitments to increase US chipmak- 
ers 1 market share in Japan and to 

rfiv-tm- agreement appears to have refrain from dumping chips in for- 
originated from Japanese industry eign markets. 

leaders, who that the bila- 

teral chip pact has created rather 
than reduced tension. 

Although top government offi- 
cials yesterday refused to confirm 
the existence of the near proposals, 
it is understood that Japan is con- 

fa protest at the alleged violation 
of the pact, the US last month im- 
posed 100 per cent tariffs on S300m 
worth of Japanese exports to the 
US. Japan would like to see those 
farnffc removed before the .T une 
summit in Venice of the lead ers of 

fee IndlIS frfaliBe d nations . 

The Japanese industry leaders 
who are pressing for a new ap- 
proach are particularly aggrieved at 
l osing market share in important 
South-East Asian markets where 
chip price-cutting by competitors 
has become cut-throat 

The industry would prefer quotas 
or floor prices on semiconductor 

trade on an international basis, 
rather than the current pact's em- 
phasis on "fair market value" prices 
determined by the US Department 
of Commerce, fa Hong Kong, for ex- 
ample, where the industry has now 
raised chip prices in accordance 
with US demands, Japan's share of 
the market has dropped from 90 to 
50 per cent in recent months. 

Further, the EC is currently pro- 
testing against the US-Japan chip 
pact at the Gate Both Japan and 
Europe, as a resu lt , would have an 
interest in widening a semiconduc- 
tor trade pact beyond its current 
bilateral status. As the bOateral 
pact obliges Japan to monitor chip 
prices in third countries, it has 
forced Japan into an unwelcome 
“policeman" role. 

World trade, Pag* 5 



... 24 


Companies ... 

: Companies ... 


Companies .... 

Wo rid Trade S 

Britain .... 

Companies ....... 25" p, 29 

Agriculture 86 

Amwlirtuwuis wl’Hftlifrig 

Arte- Renews 

-WorU Gride 


CbmnerfltiM.. — • 26 




.... 15 . 


Editorial comment 

Ffaancte! Fotures 

bxtL Capitol Marked 


Market Monitors 

Men and Matters 
Money Markets 
Raw Materials . 

Stock markets -Bourses .... »,4Z 

—Wall Street 39-12 

-London..--- 36-3 8,42 
ttoefcoolbiy - S 

Mar...... u 


Egyptian President Hosni Mubarak: 
gra pplin g with the country's economic 
problems. Page 3 

Ireland: referendum that voters find 
hard to understand 2 

UK election: battle lines drawn between 

main parties 6,7 

Technology: electronic house arrest 

helps US prisons 12 

Management: Denmark's Novo takes an 

insulin giant in US 14 

Editorial comment: calling a spade a 

shovel; UK elections 16 

Lex: banking after Citicorp; Rolls-Royce; 

brewers; Coloroll.. 18 

Survey: business travel..... Section III 
Survey: UK pensions .Section IV 


In business as well as in 

travel Thomas Cook have 
always been going places. But 
never more so than since they 
moved their international 
headquarters to Peterborough. 

With Peterborough^ over- 
heads amongst the lowest in 
the country, Thomas Cook 

annually gave mil linns compared 

with the cost of operating in 
London. Yet theyie still only 50 
minutes by train (via Kings 
Cross) from the capitaL 

Presently, we have office 
space ranging from 200 to 
60,000 sq. ft. ready and waiting 
to be moved into. 

Of course, like Thomas 
Cook you might prefer 
something built to your own* 
design, in which case we can 
provide you with the ideal 

Don't you just wish you 
were here? Then cut out the 
coupon now. 

Stuart House, Gty Road. E 
me your free complete guide 

to relocation. 

?E1 1U J. Please send 



0 Financial Times Thursday May 21 1937, 



Chirac and Kohl aim to align missiles stance Q f compromise on 


ENCH and West Ge rman, 'the "doable xero* option " is liable to call into question the initial INF "aero option Prime Minister's office believed m AlffttTlliniTV Qll* 101*06 
Hers wUl be meeting in Paris' covering both shorter and France’s land-based tactical proposals” so as to avoid the that it was knitting together a ij Cl J 1. XC&A. viJ 

av fnr a nnrnnlr nrnnnl .. t <iAmVmJUvinb_, «v» Vlnt/m aflrf thfl mmomirp of nMOtisKnng fm Vnnpn/RriKsh /Oarman amvin) • 


*®ENCH and West German, ’the " double aero* option" 
icaneri will be meeting in Paris anwrins both «hari»r and 

Industry in 
Italy seeks 
return of 

leaders will be meeting in Paris covering both shorter and 
for a summit expected longer (lOOOkm-SOQOkm) range 

to clear up some of the current 
confusion over a European 
response to Soviet disarmament 

Propos als on intermediate rangej 


In practice, this compromise 
osition was intended to show 
lat France would be willing 

is liable to call into question the initial INF 
France’s land-based tactical proposals” so a 

the Platon and the quagmire of negotiate 
Hades. Both want a "fire shorter range weapons. 

INF " aero option Prime Minister’s office believed 
ao as to avoid toe that it was knitting together a 
of negotiations on Franco/British/ German accord 
ige weapons. They on toe basis of a shorter range 


500 km mark. 

to be drawn at toe would see an agreement on missile agreement that would 


1*000-5,000 km weapons linked have left the US and the Rus- 

Though French opposition to to further talks on shorter range sians with about 80 weapons on 

'to support the position even- >07 descent below the 500 km weapons. 

- ■ HI l mo VUUUVU — — ™ ; . . . , - 

The French position as out- tually adopted by Chance llo r be firady PJJ* This French view of where 

European standpoint j* hat a disarmament agreement 

inis represents a compromise 
between his previous hostility) 

mold include battlefield range 
dssiles below the GOO km 

partners InBtran. 111 * unS?? 6 *SLS?2 0n '^i, Fre ?» C 5 ~ Finaa 

French Increasingly officials describe Chancellor German 

feel that if an arms agreement Kohl as being much pat out by expecte< 


each side. 

Apart from disarmament the 
twoday talks will also cover 
macro-economic policy, where 
toe French continue to press 
West Germany to provide addi- 
tional stimulus to its economy. 

Financing of toe joint France- 
German helicopter is also 

LUFTHANSA, the West German could dung^ regulations over 
national airline, yesterday held capacity-sharing, cut price fares 

By John WyUw in Rom* 

LEADERS of Italian industry 
yesterday paid toe highest 

out hope of a compromise deal and market access, be said. 

com plimen t to the previous 
government led by toe Socialist 

over the European Commis- In 
aion’s efforts to liberalise Cam- would 
inanity air fares. to the 

In return, the Commission 

would grant a special exemption 
to toe Treaty of Rome freeing 

mumty air fares. to toe Treaty of Rome freeing 

Mr Heins Ruhnau. the chair- airiiiwy from being sued under 
man of Lufthansa, which is one anti-cartel law. 

to an accord embracing shorter! [range, feel that if an arms agreement expected to come under discus- 

range <500km-i000km) nuclear I This is unacceptable to both is to be achieved this year as toe^anc^aMimnon, as^tne M weI1 M ^ west German 
missfles, and President Fran- " 

Chirac and President Mit- the US and Soviet Union want, French Government was itself, contribution to toe funding of 

cols Mitterrand’s acceptance oh terrand on toe grounds to** it it will have to be restricted to Prior to the statement, the the Airbus programme. 

Gorbachev denies attempting to divide Nato 

tional stimulus to its economy. of the carriers most affectort by In what Mr Suhnau clearly 
Financing of toe joint Franco- on EC assault on airlines’ interpreted as a significant 
German helicopter is also alleged restrictive practices, climb-down, he said the Corn- 
expected to come under discus- told a press conference yester- mission had . accepted . Loft- 
sloe as well as toe West German day he was " relatively opti- hansa’s view that airlines bad 
contribution to toe funding of mlstic " about toe outcome of to consult each other on fares 
toe Airbus programme. EC talks scheduled for next and routes to allow passengers 

month. to use tickets on different car- 

lo use tickets on 

erent car- 

Mr Rnhnan made dear his Tiers and to Iron out airport 
belief that the Commission, congestion. 


MR MIKHAIL GORBACHEV, future of Europe lay in "stable tactical and battlefield nuclear Gorbachev emphasised in toe 
toe Soviet leader, yesterday security,” with a minimum of weapons with a range below Unlta interview that Moscow 

flatiy rejected suggestions that arms on both sides, and In 500 kma (300 miles). 

Moscow was 

had no aspirations to keep the 

trying to drive a broad state-to-etate co-operation However Mr Lev Hendele- country In “the Soviet sphere 
wedge between toe US and and contacts and exchanges in vich, be ad of toe Soviet °* influence,” as was cl a im ed by 

Europe, e mph a sisi n g every field and at every level. Foreign Minis try evaluation the West. 

that tois would be a completely 
unrealistic policy. 

Though he said that an agree- - planning department, TJ* e Afghan Communist Part? 

ment on medium-range nuclear stressed that such cuts should leadership was free to^look for 

“ interview with the missiles In Europe was feasible, be negotiated together with partners for its "national 
Jtgian Communist newspaper the Soviet leader accused the reductions in conventional reconciliation” programme 

n . n ai uic owirei imuw ureuwu u« re Unctions in conventional >c ™ u ' 

L'Unita, Mr Gorbachev des- Western allies of complicating armK not » Mrt of the among Afghan refugees and 
cribed as " nonsense ” Western and blocking toe negotiations totvc on medium ranee missiles, emigrants In foreign countries. 

fears that toe Soviet Union was by establishing an endless chain •«, DrODn ™j hv Germanv be said. “ If Afghanistan 
attempting to split the Atlantic of links between different JT „ . . . j decides to go neutral, that again 

Alliance. “The historical rela- categories of weapons. will be up to toe Afghan 

tionship between Western 

a speech yesterday Mr tal fe . at toe Foreign Office people.” 

Europe and the US or, say, Gorbachev said Moscow would ycsterd 5? 1 said his government ^ Mr John Whitehead, toe US 

between the Soviet Union and accept a Nato demand for the SEE 0 ? 6 ! “ P^tociple °f toe Deputy Secretary of State, said 
European Socialist countries elimination of all Soviet SS-20 Government 9 * a ^ oun ?2' in Copenhagen yesterday that a 

are a noli ti rail roalitv " he said, intermediate ranee missiles In ment . week that it could, Ttfato resnenae to the latest 

are a political reality,” he said, intermediate range missiles in S'r.L 2?. L*. 11 SrzX Nato response to the latest 
“This must not be ignored if Asia as well as in Europe, only toprlMipJe, accept the Soviet Soviet arms control proposal 

one Is to pursue a realistic 
policy. A different approach 
could upset the existing equili- 
brium in Europe.” 

US mls» ,1 *s also r«- 1 0 ®"; was imminent But he declined 

Korea and the Philippines. 
Meanwhile, In London, a 

Japan, South this projms^ all US s£Ttetoer’ he 

Anal alliance response would 

emergefroni the Nato foreign 


which Is March treatened to He said the Commission in- 
up 1 egal action against eluded officials who were 
Mira, Alitalia and Olympic "somewhat distant from econ- 
ys, had climbed down omic realities " whose opinions 


from some of its most radical had been modified after “clari- 

liberalisation proposals. 

fixations ” given hy the airlines 

He also warned against tr»ns- in recent talks, 
ferting to Europe deregulation • Mr Reinhardt Abraham, vice- 

measures which had been put chairman in charge of Loft- 
into effect in the US and had hansa’s technical activities. 

led ultimately to more concert- said toe airline hoped to decide 
tration in toe airline industry tv toe end < the month to buy 

and less competition. 

definitely 15 of the planned 

Denying that Lufthansa had A-340 long-range Airbus air- 
been reluctant to enter into liners. Its previously announced 

talks with the Commission over order for the aircraft, repre- 
the last few months, Ur Ruhnau seating vital support for the 

said his airline welcomed plans Airbus -consortium’s long-run- 
to remove some restrictions nlng efforts to launch toe 

over European air transoort A-340. was put on Ice last 
which had. he claimed, worked month after development was 

to its disadvantage. cancelled of toe 

A compromise between the Superfan engine 
Cnmmi«inn and the EC trails- power toe aircraft, 
port ministers, who are holding _ _ ^ . ... 
their next meeting in June. Dollar bits Luftham 

of toe advanced 
engine planned to 

Dollar hits Lufthansa, Page 19 


control. Mr senior Soviet official said that ^ ms „ miles) ministers* meeting due to be 

Soviet Moscow was certainly prepared would be eliminated. 

Union was convinced that the to negotiate reductions 


held in Reykjavik, the Icelandic . 
Mr capital, on June 11 and 12. 

Gorbachev: 4 completely 
nnrulkttii policy * 

heads for 
zero growth 

By Lava Ram in Amsterdam 

Commission calls for stricter 
limits on radiation in food 


Poverty gap 
states grows 

The Single European Act 

Irish juggle a hot 
political potato 


THE NETHERLANDS’ economy THE EUROPEAN Commission caesium— the most Important and reflect public concern for 

will stagnate next year after ex- yesterday threw down a chat long-life form of radioactive safety in the event of a nuclear 

panding by only 1 ner cent 'Vis jenge to toe member states of contamination— to be set at accident. It also argues that 

By WiUbm Dawkins In Brands 

"WE WANT JOBS not missile meeting by touching on an 
bases; vote no ” said one of toe issue which triggers a host of 

«- Iooa — contamination— to be set at accident It also argues that 

year, according to uie nrsi iaoo European Community, by 1,000 becquerels per kilo— grain scientific opinion is by no means 
forecast from the semi-xnaepen- proposing modi stricter limits in dairy products and 1*250 agreed on ideal levels, and that 
dent Central Plan Bureau. on radiation levels in food and ba/ke in other foodstuffs, for EC food exoorts could be hadlv 

mt Central Plan Bureau. on radiation levels in food and bq/kg in other foodstuffs, for EC food exports could be badly 
The zero per cent growth is drinking water. In toe event of all food marketed in the EC at affected if Community radiation 

pa pe. largely blamed on consumer J a nuclear accident, titan their the time of any sudden increase levels are more lax than those 

'spending, which is expected to 
prise only 0.5 per cent, corn- 

own scientists recommend. 

in radiation levels. 

in other parts of the world like 

The plan is likely to leave BC Those figures compare with Aa “ 

Wuared with 3 per cent this year. me pu»n ta uway io leave inose figures compan 

S TUs is bSauL of higher taxes current levels to force 

rSesT^usliiets another accident like toe Cher- dairy products and 600 Fq/kg environment commissioner, said 
torment ^ forest to fall off “O** 1 «U“rter, just as they were for other foodstuffs, imposed on toe Chernobyl accident "re- 

inveauiieni IS I weuw ““ Y e>»w -ll .l. huTbiI onit nm i> nur 

about how they should react to Chernobyl of 370 bq 

Latin America. 

Mr Stanley Clinton Davis, the 

even more sharply, with no in- 
crease predicted for 1888 
In view of toe blgak outlook, 
Mr H. Onno Ruding, the Fin- 
ance Minister, is arguing for 
deeper spending cuts to the 
1988 budget in an effort to trim 
the deficit to around 7 per cent 
of net national income. The 
hard line finance minister 
wants to save about FI SRbn in 
departmental budgets and toe 
social security system, or twice 
as much as earlier planned, to 
keep the budget deficit from 
rising to 7.8 per cent of national 
income from 7.2 per cent this 
year. , _ 

The latest Flan Bureau 
figures show a weakening 
economy beset by slower growth 
in every major macroeconomic 

when the Soviet nuclear reactor all food imports into toe Com- veiled 

exploded last year. 

The strongest supporters of 
nuclear energy — like France, 


capacity to respond to the conse- 

On the other hand, national quences of a nuclear accident” 

nuclear energy— like France, scientists, summoned to recom- The member states took man y 
Britain and Belgium— are likely mend on what levels of c*ntam- weeks to agree common pixtec* 
to line up against those most ination are safe, agreed on tive levels for foodstuffs, lead- 
opposed, or most exposed to much less stringent limine 4,000 ing to considerable disruption 

opposed, or most exposed to 

radiation dangers, like Den- bq/kg for dairy products, 5,000 of trade. 

mark. West Germany, toe bq/kg for other foodstuffs, and The current restrictions apply 
Netherlands and Ireland. 800 bq/litre for drinking water, until the end of October, when 

The Commission yesterday The Commission argues that they will either have to be re- 
called for maximum levels of It must leave a safety margin, newed, or automatically lifted. 

800 bq/litre for drinking water, until the end of October, when 
The Commission argues that they will either have to be re- 

N-power the ‘only Soviet option 9 


THE Soviet Union has no choice toe 28&n population live west development of nu dear power 
but to meet its energy needs by of toe Urals to the European generation," Dr Bublik con- 
building more nuclear power P*rt of the country but more dudes. 

indicator except for a rise ta stations, according to a senior toan 90 per cent of its oil, gas. He adds, however, that last 

inflation. energy specialist with 1 

Unemployment also Is ex- planning Organisation, 
pected to rise above toft i year's 

energy specialist with toe State o*"* 1 hydroelectric reserves year’s disaster at Chernobyl 

average level of 13 per cent. 

This year relatively healthy 
expansion in domestic consump- 
tion and investment has pro- 
vided some stimulus for the 
economy, while exports have 
plunged under the weight of 
the strong guilder. 

But next year’s slowdown to 
spending and Investment will 
leave the economy with little 
drive since toe trade surplus 
will continue to dwindle. Many 
economists have blamed this 
year’s tepid performance on the 
plunge to oil prices and the 
dollar but next year’s economic 
woes suggest more fundamental 
problems such as excessively 
high taxes and welfare pre- 

The Central Plan Bureau 
predicts that consumer prices 
will climb by 0.5 per cent in 
1988 compared with a 1 per 
cent decline this year, that the 
balance of payments surplus 
will shrink to FI 4bn-Fl 5 bn 
from FI 6bn and that industrial 
production will expand by 0J5 
per cent compared with to 
2 per cent this year. 

Hanning Organisation. are to the east of the Urals. showed how sloppy planning 

n, R„Hiiv ««« that Electricity generated in bad been in toe past Figures 

j i. Siberia and transmitted to the show that 41 per cent of nuclear 

d _ es P y ■ f west loses S3 per cent every power station plans were 

coole . d , “ e . 1,000 km. Coal mined from vast altered during construction in 

open-cast collieries in the east 1980-84. These alterations and 
introduced m tne next five-year ^ cheap but its cost doubles the delivery of poor quality 
plan starting in 1990. to the w *th every 1,000-1,500 km equipment meant that the final 
meantime, toe Soviet Union haulage. The result is that stages of power stations were 
***** 1° re * y , oa ***** coal is still being mined in toe often completed through 
moderated ana water cooled Donbass region of the Ukraine “feverish construction work.” 
reactors. from a depth of 1 km and from Even so. Dr Bublik says, the 


Even so. Dr Bublik says, the 

Writing in the daily Sovet- seams only 60 centimetres high, average completion time for a 

skaya Rossiya, Dr Bublik says “We do not have, either to- 1,000 MW set in the Soviet 
toe baric problem of Soviet day or in the immediate future. Union is 7-10 years compared 
energy production and con- any economically substantiated to three years and three months 
sumption is that 75 per cent of alternative to the accelerated in Japan. 

Lisbon court convicts revolution hero 

I A PORTUGUESE court yester- Global Project sought to “sub- defendants were on trial to 
day convicted the revolutionary vert toe normal functioning of what was call ed “ Portugal’s 
hero Lt Col Otelo Saraiva de the institutions of this demo- *” **,{" ^ centu ry. lasting 19 
Carvalho of running a secret craticstate consecrated in the ^tejudicbd panel said prose- 1 
left-wing terrorist organisation Constitution.” cution char ges that Col Saraiva 

that sought to overthrow toe Col Saraiva de Carvalho, the de Carvalho founded a terrorist 

counUy’s 11-year-old democracy, flamboyant mastermind of the organisation 

Ap reports from Lisbon. 1974 Portugu ese co op that essentially proven.” Global 

, cmupucu viui iv | The three-judge panel sa i d ended half a century of right- Project M caused armed violence > -fumj »— — — ■ ici«muuui. puouciy wnai is u irei 

at this year. I the organisation known as wing dictatorship, and 63 other and killed people.” neighbours I Mr O’Tasfh&n closed toe very hot politi c al potato. 

Corriere della Sera baton passes to a long-distance runner 


— - “ I AM an anomaly.'* says toe correspondent, he signed his group that he would be resign- paper through the Gemina How thel v does having to discuss even delicate 1 

mean Diary abort and slightly rotund 67- despatches for New York. tog several months before his holding company) wanted a ^ Ne ^ Y ork tor four decadra How tor example, does h 


THE GAP between poor and 
rieh members of the Euro- 
pean Community widened fol- 
lowing last year’s admission 
of Spain and Portugal to the 
Community, the European 
Commission said yesterday. 

In a report on regional 
development, the Commission 
estimates that Portugal and 
Spain’s arrival lifted the EC’s 
population by 18 per emit but 
boosted the number of job 
less by 30 per cent. The 
report, which underlines 
starkly the difficulties to 
reconciling member st ates* 
economic Interests, says 
Portugal’s income per bead is 
around half of the EC 
average, while Spain’s Is 75 
per cent. 

“The. pieture that emerges 
Is far from rosy. Regional dis- 
parities have become even 
larger,” said MY Alois 
Pfeiffer, the Commissioner in 
charge of regional policy. 

While the Community's ta- 
largemeflt has played a big 
part in this trend, the report 
also blames above average 
rises in the labour force to 
the southern and western 
member states — like Italy, 
Greece and Ireland — and 
differing rates of adjustment 
to the decline of traditional 
manufacturing Industries. 
Those factors, ph» inade- 
quate co-ordination of 
national ymt Community 
regional policies, have com- 
bined to leave the gap 
between the areas of highest 
and lowest unemployment 
two and a half times wider 
in 1985 than a decade pre- 

Closer economic co- 
operation between member 
states is one of toe alias of 
the Single European Act. now 
awaiting toe results of an 
Irish referendum next week. 

“The regional disparities 
Identified ta this report show 
that the Community Is still a j 
long way from baring ; 
achieved these objectives,” I 
said toe Commission, which Is 
attempting to persuade mem- 
ber mates to double regional 
funds by 1992. 

The reports predtete that — 
In toe right conditions — the 
completion of a genuinely 
free internal market by 1992 
could help member states to 
catch up by trading mere 
openly with their rich EC 

posters pinned up around the 
basement room in Dublin’s 

Irish sensitivities about its pain- 
ful historical relationship with 

Liberty Hall where the Irish Britain. In 1981, Ireland pulled 
Transport and General Workers out of EC economic sanctions 

Union was hosting a meeting on against Argentina when war 
next week’s Irish referendum began in the south Atlantic over 

on tiie Stogie European Act. the Falkland inland* “ la the 

SSdiS r^SSle bodr " “ r OTtaiauil 

Danes from a visiting Green- Opponents of toe Single. Act ! 

peaee ship and a member of toe - sprang quickly into action after 
Scottish Campaign for Nuclear Mr Raymond Grotty, an Anti- 

Disarmament who spoke in a EEC economist, won his case 

gentle Highland lilt of toe against it in the courts. 

dangers «"«ii mtinnn faced to decision that is holding up 

aiHancpg with more powerful implementation 


The ITGWU opposes Dish 
ratification of the SEA and the 
mood in toe audience caught 
the central fears among those 
campaigning against it that the 
Act threatens Irish neutrality, 
would stunt Dublin’s ability to 
puisne an independent foreign 
policy — and is a bad lot econo- 
mically, to boot 

In the face of a c enterin g 
blast of campaigning by both 
the anti-act and pro-act camps, 
Irish voters are straggling to 
understand what it is all about. 
The Act is meant to streamline 

because it has to be ratified by 

In the £ace of a 
confusing blast of 
campaigning by both 
the pro-Act and 
anti Act camps, Irish 
voters are struggling 
to understand what 
it is all about 

government led by the Socialist 
Mr Bettino Craxi by requesting 
a reincarnation of the five-party 
coalition whose break-up has 
precipitated a general election 
on June 14. 

Neither Mr Luigi Lu echini, 
toe president of Confindustria, 
nor other leaders at the organi- 
sation's ■"""«! assembly went 
as far as calling for the 
restoration of Mr Craxi at the 
helm, but they all enthusiasti- 
cally d emande d a new period 
of political stability to cany 
through necessary economic and 
industrial reforms. 

“ Certainly toe stability of the 
five-party coalition and the 
continuity of its policies have 
been largely responsible for 
economic success and the 
vitality of business,” said Mr 
Lucehini, in his presidential 

“It is now up to the political 
leaders to overcome party 
differences and restore the 
possibility of a 'good legisla- 
ture’ and of 'good govern- 

His declaration won nodding 
approval from a former bead of 
Con find ustria, Mr Gianni 
Agnelli, the president of Fiat, 
who said that he too, hoped that 
the five-party coalition would be 

Mr Lucchini's 50-page speech 
was very much an agenda for 
the next government, stressing, 
as he has done on several 
occasions recently, toe declin- 
ing competitiveness of Italian 
industry after a 7 per cent f; i’ 
in the value of exports in the 
first quarter- This he holds to 
be dne partly to the inadequacy 
of public administration and 
services, and unreasonable 
fiscal burdens which pushed up 

He called for more efficiency 
from toe banking system, 
infrastructural improvements 
which would encourage the 
birth of companies, particularly 
in the south, a new energy 
policy and greater freedom for 
capital movements. 

Of the five parties led by Mr 
Craxi for three and a half years, 
only toe Christian Democrats, 
toe largest, and the Liberals, 
the smallest, are yet publicly m 
favour of reviving toe formula 
after the election. 

The Republicans are publicly 
keeping their distance and 
privately to favour, while Mr 
Craxi is limiting himsplf to urg- 
ing toe electorate to vote for 
toe reformist lay parties -—that 
is the previous members of his 
coalition minus the Christian 

He will not weaken his bar- 
gaining hand with the Christian 
Democrats in advance of the 
election result, although he 
knows that a new pentapartita 
coalition, led this time by a 
Christian Democrat, is the most 
likely outcome. 

Libyan team 
arrives for 

talks in Malta 

By Godfrey Grim in VaMrtta 

all EC members before it can 

toe European Community and come in to effect. 

bring European unity a small The influential church Itself 

step closer by economic has played a coy -role. The 
measures designed to dismantle Conference of major religions 

remaining trade barriers and 
political measures designed to 

superiors wrote to all members 
of Parliament expressing con- 

ensure fullest foreign policy cern about the neutrality aspect 
agreement between members, and toe “serious moral impli- 

A1I EC members have ratified 
it except Ireland. 

cations” of the Act, but stres- 
sing their commitment to Ire- 

Mr Tony Brown, International land’s involvement in toe EC. 

Secretary of toe Irish Labour Despite the political disparity 

Party, given the task of con- of those against the Act, their 
verting his listeners at liberty campaign has clearly rattled 

Hall to the Act, made little lm- the «»»»« political parties 

press! on with his evocation of Fiaiina Fail, the government 

the socialist dream of a united party, and Fine Gael and toe 
Europe. Mr John Caroll, Presi- Progressive Democrats, the 

dent of toe ITGWU, scoffed main opposition parties, are 
" toe dream has left this country fighting their case mainly on 

with a quarter of a million an- economic grounds: 

employed.' 1 

would be a disaster for Ireland. 

Mr Seamus OTnatoaH, a law- a big net beneficiary from EEC 
yer, said there was no doubt funds, to snub the rest of the 

that Title 3 of toe Act — under Community on an Act they say 
which toe EC member states cannot he renegotiated. 

agree to work for a common The big weakness In their 
foreign policy and to discuss campaign appears to be the 
“ political ana economic aspects neutrality issue. Staying out of 
of security,” would inevitably Senior politicians committed 
drag Ireland towards alignment to Europe, some of whom pri- 

with NATO to which all EC vately admit that neutrality is 
states except Ireland belong. It anomolons and should be re- 

was Title 3 that the Supreme defined or even abandoned. 
Court ruled last month was are on the defensive because 

unconstitutional, prompting the 

they are reluctant to confront 
publicly what is in Ireland a 

delegation begins talks here 
today with Malta’s new pro- 
Western government of Dr 
Eddie Fenech AdamL They 
are expected to Involve a 
wholesale review of relations 
between the two countries. 

However, Libyan operations 
to Malta, which in cl ode a 
teachers' institute, a powerful 
radio trananitter which broad- 
casts to Europe and the US and 
a lending library, are not 
believed to be under threat. 

Dr Fenech Adami’s govern- 
ment Is anxious to convince 
Libya that its pro-Western 
policies should not be viewed 
as barmfnl to Tripoli’s inter- 
ests. Greeting toe delegation, 
which is headed by the 
Industries Minister, Mr Fathi 
Hamed Shatwan, Dr Fenech 
Ad ami emphasised Malta’s 
desire for continued close 


Libya’s importance for toe 
bland springs from its geo- 
graphical proximity, its 10 
factories on toe island and Its 
healthy trade balance with 
Malta. Last year Libya bought 
M£9m (£i6m) worth of semi- 

The delegation had originally 
been due to arrive last Satur- 
day, but was delayed when 
Col Muanmar Gadaffl decided 
to upgrade it by including Mr 
Ahmed Shahati, a hey figure 
at toe Foreign Ministry. 

European Diary 

"I AM an anomaly.” says toe 
abort and slightly rotund 67- 
yearold Russian-born American 
citizen who has just taken over 
as the editor of what used to he 
Italy’s leading dally newspaper, 
the Milan-based Corriere della 


His given name at birth in 
Moscow was Mikhail 
Kamenetzld, but in 1939. then a 
20-year-old anti-fascist intellec- 
tual and writer to toe Rome 
underground movement (his 
family emigrated to Italy in 
1921), he changed it to Ugo 
Stille. For the past 41 years it 
was with this respected byline 
that, as the Corriere's chief US 

correspondent, he signed his 
despatches for New York. 

“ I love New York,” says Mr 
Stille. speaking fondly of his 
apartment on East 8 1st Street 
and Ids friends Norman Mailer, 
Saul Bellow, Mary MacCarthy 
and other " members of the 
New York Review of Books 

Mr Stille's predecessor as 
editor, also a former foreign 
correspondent, saw his career 
come to a quick finish some 
three months ago, on February 
12. just before he was to set off 
for lunch. The affable Piero 
Ostellino was informed by his 
bosses at the Rizzoli publishing 

group that he would be resign- 
ing several months before his 
contract was due to expire. 

Mr Ostellino was sacked, 
according to members of his 
own editorial staff, mainly 
because he allowed toe Corriere 
to drift and was unable to see 
off competition from La 
Rejrabbllca. The Rome daily 
baa overtaken the Corriere's 
510.000 copies a day by 30,000 
to 40,000 

Further, say insiders at toe 
Corriere, Mr Ostellino’s 
editorial line was seen as pos- 
sibly being too dose to toe 
Socialist Party, and Flat (which 
indirectly controls the news- 

paper through toe Gemina 
holding company) wanted a 
more neutral and non-political 

Mr Stille, who speaks flawless 
English, lends credence to this 
interpretation. “ There are 
times to appoint a political 
editor and there are times to 
appoint a professional I was 
selected firstly because I have 
been with the paper for 40 
years and I represent tradition, 
but secondly because X am free 
of all political influence." he 

What does he think of Italian 
politics? “X*m not even going 
to comment" 

How, then, does having lived 
in New York for four decades 
prepare one to become editor 
of the Corriere della Sera? 
“It can be helpful,” he replies. 

And what is to be done to 
improve the Corriere, which 
Mr Stille admits is much in 
need of reorganisation? "This 
is a newspaper with an enor- 
mous potential which needs to 
be taken advantage of. We need 
to get toe Corriere back to its 
tradition of being authoritative, 
but we also need to make it 
more modern." 

Mr Stille Is an unpretentious 
and extremely relaxed indivi- 
dual. He is perfectly willing 

to discuss even delicate issues. 
How for example, does he feel 
about the Corriere’s ability to 
provide objective financial 
coverage of Nat. which not 
only controls his newspaper 
but the Turin-based La Stamps , 
also? He first admits that to 
Italy the manipulation of news- ! 
papers by their corporate 
owners " can be a problem ” : 
and toot declares that “I 

Far toe present, he is con- j 
centra ting on trying to revive 
his newspaper’s flagging for- 1 
tunes, which he acknowledges 
will be a "tiring labour" and 
a * challenge." 


PnbHshad by The Financial Than 
(Europe) Ltd. Frankfort Branch, 
wptMU lt J by E. Hugo, Frankfurt/ 
Mato. and. aa members of the 
Board of Directors. F. Bartow. 
RAJ. MtQaa n. G.TJS. Darner, MC 
Gasman, IXEJ. Palmer, London. 
PrtatBK Fronfctorter-Societau- 
DntdwretOndrH, Ffcankfurt/Main. 
B**po*»ttie edit or: H.A. Harper, 
ponkfurt/Main. Gutollettstraaae 
54. 0OM Frankfort am Main j_ q 
T he Financial Times Ltd. 1887. 

180040 , published daily raoept Sun- 

^andtedi,^ u& eutampbon 
mtea *365-0 0 per a n num . Second 
ctaas postage paid at New York. 
HLY. and at a d rtWmi al mailing of. 
tea. POSTMASTER: mod address 
changes to FINANCIAL TIMES. 
JUS?* 1 a9th Sereet * Now York, N.Y. 

i % ; 


Financial Times Thursday May 21 1987 

i’k' is ^ 

S. Korea court p w - Botha 
protest over 

judge’s decision on poutics 


THE DEFENCE counsel in the trial 
of three South Korean journalists 
accused of violating the country's 
national security laws yesterday 
protested strongly at the judge’s re- 
fusal to allow the accused to call ex- 
pert witnesses on press freedom. 

The journalists, who wo rk for a 
bi-monthly magazine “Words" were 
charged following their decision to 
publish guidelines issued by SeouTs 
Ministry of Culture Informa- 
tion to local newspapers on what 
they should print The journalists 
face long jail s e nt e n c es and in the- 
ory even the death penalty if they 
are found guilty. 

Attention has focused on the case 
because the South Korean Govern- 
ment has recently offered to allow a 
greater measure of press freedom. 
The offer came in the wake of Pres- 
ident Chun Doo H wan's announce- 
ment last month that titling pu de- 
mocracy were to be snspkided until 
after tie Seoul Olympic Gaines in 

South Korea’s press has been 
more strictly controlled than in 
most Asian countries for years, al- 
though some relaxation has been 
permitted recently. The two jour- 
nalists who work for “Words” were 
from their jobs an national 
papas in 1975 and 1980 during gov- 
emnent purges of journalists seen 
as too radical. 

The third journalist; a subeditor 
on the Hankuk Ubo daily newspa- 
per, is charged with supplying a 
copy of the ministry guidelines. 

Government officials say that be- 
cause of the country’s security situ- 
ation, it is necessary to ask newspa-. 
per editors’ co-operation on mili- 
tary, diplomatic and ideological 
matters. But according to senior 
South Korean journalists, the 
guidelines routinely instruct press 
and television on the length and 
placement of articles, on whether or. 

Left wing 
threat to 

By Richard Courts/ in Manila 

THE left wivr Alliance tor 'New 
Politics yesterday said there 
was a good chance its supporters' 
would becomq. disillusioned and. 
abandon electoral politics ‘ liT 
favour of armed struggle follow- ; 
ing what it said were fraudu- 
lent elections in the Philippines 
last week. 

The ANP accused the admini- 
stration of President Co razor 
Aquino and her coalition of 
massive vote buying and intimi- 
dation by the military especially 
in areas where its candidates 
were strong. Mrs Aquino looks 
likely to win 22 of the 24 sena- 
torial seats and three quarters 
of the' 200 elected House of 
Representatives seats. 

The Government claims some 
of the political movements in 
the ANP have strong links with 
the Communist New People’s 
Army rebels. 

Chun Doo Ewan 

not to use pictures or film of indi- 
viduals or events and on what arti- 
cles may not be published. 

Counsel for the three accused 
yesterday told a courtroom packed 
with about 150 foreign and local 
journalists that the people's aspira- 
tions for democracy and freedom 
rested on the outcome of the hear- 

He cnmplyfngii flint foe judge, 
who had earlier been praised for 
conducting a fair trial, had no inde- 
pendence and was subject to “invisi- 
ble pressure." 

The defence has called an ar r a y 
of senior local journalists edi- 
tors to the witness stand. But be- 
fore the hearing the judge decided 
that plans to call experts on press 
freedom,- fnchiding r eside n t faw»ign 
journalists who have pubtished arti- 
cles about the trial, could not go 

- Yesterday’s hearing was abruptly 
adj cured until next week by the 
judge after a volley of defence pro- 
test at his decision had excited ap- 
plause from spectators and heated 
argument from the prosecution. A 
Ministry of Culture and Infor ma- 
tion spokesman said there would be 
no comment until the case was con- 

Japanese held 
for selling US 
fighter secrets 

■y Garb Rapoport in Tokyo 

TOKYO police have arrested 
four- Japanese for - allegedly 
gftUtng US military Information 
to -the Soviet Union in what 
is the first case 
of kind. ; - ... . . 

The Information, which con- 
cerned the US F-16 aircraft, 
was allegedly stolen by a 
Japanese employee at the US 
military base in Yokota, near 
Tokyo. He then sold the 
information to a Tokyo-based 
writer on military affairs who 
in turn, sold it to two others. 

All four are now co-operating 
with police inquiries. The 
Soviet officials who bought the 
information, however, have 
since left Japan. 

The Japanese are treating 
the case is theft, not espionage. 
However, police investigators 
say that evidence of spying 
could emerge from subsequent 
questioning of the four sus- 

If you can’t prove 
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Tony Walker examines the pressures on Mubarak after the IMF pact Indonesia 

Egypt battles with its past 

in conversation with Egyptian to the disbursement of addi- 

intellectuals and officials about tional funds— if Egypt is able wAioMmc 

their country’s financial crisis, to sustain the reforms. “ If lTwl.OBri.USr 

Botha has told businessmen to stay 
out of politics and confine them- 
selves to commercial affairs. Renter 
reports from Bloemfontein. 

Addressing the influential Afri- 
Handdanstituut (Com- 
merce Institute) last night, Mr Bot- 
ha said bis warning applied particu- 
larly to attempts by some South Af- 
rican businessmen “to improve the 
credibility of revolutionary ele- 
ments" like the outlawed African 
Notional Congress (ANC) guerrilla 

"Let each of ns -government and 
the private sector - carry out the re- 
sponsibilities entrusted to us in our 
own terrains," be said. 

“Business leaders can now safely 
leave the goupmrr ^gnt in the bond s 
of the people who are the chosen 
leaders of the country." 

In his bluntest speech yet an the 
involve m ent of businessmen in poli- 
tics, Mr Botha warned executives 
not to try to prescribe to tiie govern- 
ment on political issues. 

He also warned the heavily cen- 
sored media and the universities 
not to promote opposition activities 
“under the guise of freedom of the 
press and of expression." 

Mr Botha singled out e x e c utive s 
who have held talka with exiled 
leaders of tie banned ANC for par- 
ticular criticism. 

He did not wwwh» the busi- 
nessmen, but said the ANC was 
"cynical and even insulting” about 
them. Two years ago, a group of 
South African executives, most of 
them members of the country’s En- 
glish-speaking corporate elite, wmt 
to 7nmhia [ to titI 1 r with 

ANC represen ta tives. 

Last year, the country’s two big- 
gest employer groups, the Federat- 
ed Chamber af Industries (PCI) and 
the Association of Chambers of 
Commerce, advanced detailed pro- 
posals for political federalism. 

They called far a bill of rights 
that would give all South Africans a 
vote, but retain guarantees for the 
security of the white minority. 

Israel cabinet 
to consider 
sanctions plan 

AN ISRAELI Government commit- 
tee has prepared a . report for cabi- 
net approval on. sanctions against 
South Africa in line with those 
adopted by Western nation?, Renter 
reports from Jerusalem. 

A Foreign Ministry official de- 
clined to elaborate on the contents 
of the' report prepared by a group 
led by Mr Yossi Beilin. Foreign 
Ministry Director-GeneraL 

Officials have said Israel, in pro- 
test against Pretoria's racial poli- 
cies, was considering banning new 
investments in South Africa, reduc- 
ing trade and barring ministerial 

Israeli leaders have been under 
OS pressure to reduce ties with 
South Africa. They asked the com- 
mit tee to propose trade and cultural 
sanctions two months ago, when Is- 
rael announced a ban on new mili- 
tary contracts with Pretoria. 

In conversation with Egyptian 
intellectuals and officials about 
their country’s financial crisis, 

. it is surprising how often the 

name Khedive Ismail is 
mentioned. It is almost as if 
the 19th century ruler is a 
contemporary figure. 

These references to the profli- 
gate Ottoman ruler, who 
bankrupted Egypt and was 
forced to sell its share in the 
Suez Canal to Britain, reveal 
how important Egypt’s past is 
! in assessing its present and the 
future. Egyptian sensitivity 
about Indebtedness to foreign 
banks is attributable in part to 
Khedive Ismail's legacy. 

The International Monetary 
Fund last week, after protracted 
negotiations, approved an 
Egyptian request for 53 25m in 
balance of .payments support as 
part of the first phase of a 
rescue package that requires 
Egypt to begin implementing 
limited economic reforms. 

A feature of the IMF agree- 
ment Is its flexibility on the 
timing of reforms and its 
sensitivity towards political 
constraints on the Egyptian 
government There is no 
requirement, for example, for 
bread price rises. 

A generous IMF arrangement 
while hardly viewed by 
Egyptians as an Ideal solution 
to their problems, will, never- 
theless, provide a breathing 
space for the hard-pressed 

But Egyptians question 
whether President Hosni 
Kubarat who is nearing the end 
of his first six-year term, will 
make the best of diminishing 
opportunities to overhaul a 
cumbersome bureaucracy, 
widely acknowledged to be the 

Mr Tahsin Bashir, a former 
senior diplomat and spokesman 
for Mr Sadat; believes that 
Egypt is an “institutional 
bureaucracy " Incapable in 
Its present form Cfi respond- 
ing to challenge such as 
the p?or record of public 
sector industry which' is 
responsible for 70 per cent of 

Khedive Ismail — thorny legacy 

industrial output the failure of 
agriculture to meet the needs of 
a growing population, and urban 

Acceptance of the DCF reform 
package is seen In Egypt as a 
possible -mportant step towards 
a rationalisation of the economic 
and bureaucratic structure, but 
optimism is tempered by lessons 
of the past. An IMF loan agree- 
ment in 1978-79 quickly col- 
lapsed because of lack of 
political will to pursue reforms. 

This time, the position is more 
precarious with queues of 
creditors knocking at the doors 
of the central bank. Egypt 
needs an IMF agreement to 
facilitate, through the Paris 
club, a rescheduling of about 
$10bn of official debt 

This would enable it to 
re-establish its creditworthiness, 

undermined by mounting 
arrears on its total foreign debt 
of about $40bn. Payments on 
suppliers credits, for example, 
are more than 20 months over- 

Western officials regard as 
promising Egypt’s acceptance of 
IMF terms which include reduc- 
tions in the budget deficit, 
exchange rate reforms, in- 
creases in interest rates, restric- 
tions on credit and energy 
price rises. But they warn that 
the reforms mark a minimum 
first step. 

Price increases for fuel oil 
and kerosene, even though sub- 
stantial in percentage terms, 
leave them at only a fraction of 
the cost of such items on the 
world market. 

Progressively tougher IMF 
requirements will be attached 








14 S 

7 5 







Real GPP growth %) 55 75 5j8 6.9 1.0 

Inflation (%) 145 111 17.1 135 2SA 25J 

Current account 

(US$m) -1.K2 -411 -2,081 -2J4S -3508 —3 /WO 

* Estimates. 

to the disbursement of addi- 
tional funds— if Egypt is able 

to sustain the reforms. " If 
there are any problems Z’m sure 
they will backtrack,’’ said a 
Western economist. 

Egypt's malq concern about 
the package, apart from a worry 
about the political consequences 
of being seen to bow to external 
demands, appears to be over the 
possible impact of the reforms 
on prices. A senior IMF official 
said that Mr Mub&rak was less 
concerned about the substance 
of the IMF programme than 
about its inflationary effects. 

Increases in Egypt's cost of 
living are estimated by indepen- 
dent authorities, such as the 
World Bank and IMF, to have 
been between 25-30 per cent in : 
1986. This is a significant in - 1 
crease on the year before when ! 
price increases were in the 
order of 15 per cent Inflation j 
is both an enemy of reform and 1 
a threat to the IMF programme. I 

Bankers are also worried | 
about the impact on economic 
growth of IMF-inspired 
measures to restrict credit. 
They say this could deepen the 
recession, as it will affect most 
immediately the more dynamic 
private sector. 

The IMF agreement and its 
aftermath is seen as a possible 
watershed in Mr Mubarak’s 
Presidency. It affords him an 
opportunity to push forward 
genuine reforms, but it is also 
a potential danger period if the 
reforms lead to undue pressures 
on prices. 

The good news for Mr 
Mubarak is that two of Egypt's 
main foreign exchange earners 
have strengthened. Oil prices , 
have firmed and tourism is up. 

Not all Egyptians necessarily 
welcome signs that pressures i 
are easing on the government. ; 
They fear that this might en- 1 
courage it to ignore the need ; 
for fundamental reforms. “ I'm 
happy if there are pressures," | 
said Mr Bashir. “ I think the I 
Egyptian system works better 
under adversity.” 1 

By John Murray Brown in Jakarta 

THE WORLD BANK has called 
on Indonesia to adopt new trade 
and investment reforms while 
maintaining balance of pay- 
ments stability in the wake of 
last year's dramatic collapse in 
oil earnings. 

In its confidential annual 

report, the Bank recommends 

continued tight monetary policy, 
ibe roll back of agricultural 
subsidies and the dismantling 
of trade protectionism to 
encourage non-oil exports. 

The report comes ahead of 
next month's meeting of 
Western donor nations in The 
Hague of the Inter Govern- 
mental Group on Indonesia. 

The Bank recommends the 
level of aid — in the form of 
soft loans and grants — at 
S2.5bn (£1.5bn). much the same 
as amounts pledged in 19S6. 
However the Bank urges donors 
this year to provide “special 
assistance in the form of local 
cost financing.” 

The report estimates that 
□on-oil growth in the economy 
will be at 2 per cent over the 
next two years. Total GDP 
growth last year was estimated 
at 2.4 per cent. 

The Bank projects Indonesia’s 
annual external borrowing re- 
quirements over the coming 
three years at $6.9bn, 25 per 
cent higher than present levels. 

Total debt is forecast to 
reach $46.1 bn in 1990, but the 
service ratio — debt repayments 
as a percentage of exports of 
goods and services-— will peak 
at 41 per oent in 1987-88 com- 
pared with 37 per cent in 1986- 

While continuing to cut 
imports — down 15 per cent in 
1986 the Bank calls for further 
deregulation In import and 
trade licensing to keep the cur- 
rent account deficit in 1987-8S 
to about $2.3bn, down from 
$4.1bn in 1986-87. 

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financial Times Thursday May 21 1987 



Argentina signs 
$2bn debt 
payment accord 


ARGENTINA yesterday 

clinched a 92bn debt re- 
scheduling agreement with the 
Paris Club grouping of 
sovereign creditors, c key ele- 
ment in the country’s exten- 
sive refinancing programme. 

The agreement wins terms be- 
lieved to he unprecedentd for a 
Latin American debtor and will 
strengthen Argentina's case 
with commercial banks from 
whom it is currently seeking a 
SS2bn rescheduling and new 
loan package. 

Argentine debt falling due 
from January 1986 to June 
2988 will be rescheduled over 
10 years, including six years 
grace. Unlike Brazil and Mexico, 
Argentina has succeeded in 
having 100 per cent of principal 
and interest rescheduled both 
on arrears and payments still to 
come due. 

The agreement is conditional 
on Argentina finalising its Inter- 
national Monetary Fund pro- 
gramme, which in turn is 
dependent upon the bank pack- 
age reaching the “critical mass" 
of acceptance, believed in 
Argentina's case to be more 
than 90 per cent of the total. 

Separately, the World Bank's 
board has approved a 3500m 
loan to support Argentine 
export reforms, part of a $2bn 
package of financing from the 

The Paris Club, which agreed 
an 9884m rescheduling pact with 
Zaire this week, is also sche- 
duled to hold talks with Egypt. 

The agreement is part of a 
series by major debtor coun- 
tries with sovereign and com- 
mercial creditors which has 
helped to reduce concerns about 
the debt crisis and paved the 
way for Citicorp to adopt its 
new stance this week. 

Wary welcome from 
Third World debtors 

THE BrizHian Government — 
Citibank's largest foreign 
debtor with liabilities: of 94.6 bn 
— responded cautiously to the 
bank’s decision to raise its 
reserves, while foreign bankers 
in the country appear divided 
over the measure, Ivo Da winy 
writes from Rio de Janeiro. 

After a meeting with Mr 
Michael Kelland, president of 
Citibank in Brazil, Mr Luiz 
Bresser Pereira, the Finance 
Minister, issued a statement 
insisting that the step would 
not influence the country's 
negotiating strategy on its 
$113bn foreign debt. 

Citibank’s move, exactly 
three months to the day after 
Brazil's suspension of payments 
on its longer-term commercial 
debt, has provoked consider- 
able unease in financial circles. 

Some foreign bankers believe 
the move will open new options 
for resolving Brazil's debt 
crisis, but others suggest it will 
also inevitably weaken the 
country’s tough negotiating 
stance in forthcoming debt 
talks, as yet without a 
scheduled date. 

“It gives Citibank the flexi- 
bility to be either tougher or 
make concessions,” one banker 
said. “I fear it means they 
will be tougher.” 

But another foreign banker 
with a substantial exposure in 
Brazil said the measure was a 
positive step both for the 
country and its 35<k>dd creditor 
banks. ” It means we are going 
to negotiate from a position of 
strength and coherence in a 
constructive way,” he said. 

Tim Coone writes from 
Buenos Aires: Official reaction 
In Argentina was muted, while 
the foreign banking community 
felt that Citicorp's decision will 
greatly strengthen the position 
of the banks in future negotia- 
tions on Latin American debt 

Mr Richard Hanley, the presi- 
dent of Citibank, Argentina, 
however, was at pains to stress 
that "there is no question at 
all of taking a loss on 
Argentina's debt, or Indeed of 
any country's debt. There will 
be no write-down of loans and 

we intend to continue nego- 
tiating solutions that will help 
to stimulate growth in these 
countries. We are willing to 
continue refinancing within the 
Baker context." 

A senior executive of another 
US bank in Argentina warned, 
however, that Citicorp's move 
could provoke deeper divisions 
within the steering committee 
which Citicorp leads in the 
various debt renegotiation 
rounds. “ Many banks are 
terrified of provoking a con- 
frontation with the debtors as 
their reserves are totally 
inadequate should one of the 
major debtors default. 

“Citicorp tends to take a 
hard line with the debtors and 
It will now have a tremendous 
increase in bargaining power 
both with the debtors and 
within the steering committee.” 

David Gardner writes from 
Mexico City: senior central I 
bank officials greeted Citicorp’s 1 
move yesterday as reflecting the . 
risk of their Third World ex- ! 
posure in their profits and 
finally recognising reality. 

A senior Finance Ministry I 
official said the move opened up i 
new possibilities of more far- 
reaching solutions to the debt 
crisis and of offering longer 
term relief to debtor countries. 

The official noted that in 
Mexico’s recently concluded 
marathon negotiations with its 
creditor banks a range of longer 
term, more imaginative solu- 
tions to the country's debt 
burden — such as the partial 
capitalisation of interest or exit- 
bond facilities for some creditor 
banks, could not be given 
serious consideration. 

In some quarters Citicorp’s 
ability to make such massive 
loan loss provisions is seen as 
providing the dearest evidence 
yet that US banks have long 
been in a position to make 
greater concessions to sovereign 
debtors, and that they have 
been making “ artificial ” profits 
even as the secondary market 
was putting a much lower real 
value on loans to less developed 

face loss 

By Dsvfd Laxdlcs, 

Banking Editor 

AFTER the US banks, British 
banks face pote n tially the most 
difficult decisions in the write 
of Citicorp’ 8 move to transfer 
J3bn to its loan loss reserve. 

Although they have stea dily 
been increasing their reserves 
against loan losses in recent 
years, the UK dearers remain 
among the less well provided 
for as regards Third World 

While it seems unlikely that 
any of them will be prompted 
to make a sudden massive pro- 
vision as Citicorp has done, tire 
move by the largest US ba nk 
will ensure that pressure for 
further provisions will be main- 
tained. The statement by the 
B ark of England yesterday will 
make sure erf that 
The two most exposed banks 
are Midland Bank, which 
acquired most of its Latin 
American exposure through 
Crocker National Bank, its 
former US subsidiary, and 
Lloyds Bank which has 
traditionally had a large busi- 
ness in countries such as Brazil, 
Argentina and Mexico. 

At the end of last year. Mid- 
land had a total of £3.4bn out 
to Brazil. Mexico and Argen- 

Although Midland does not 
detail its provisions. It did 
make a special £160m charge 
against loans to “ certain re- 
scheduling countries " in its 
1986 accounts. 

Its total provisions at the end 
of the year amounted to 3.1 per 
cent of its loans, below the 3.7 
per cent set by Citicorp after 
this week's increase. 

To achieve Citicorp's level in 
one swoop. Midland would 
have to set aside £400m to 
£600m, analysts estimate, which 
would leave it with a loss of 
£200m on this year’s profit 

Lloyds Bank has £2.7bn out 
to Mexico, Argentina and 
Brazil. Its total provisions at 
the end of last year amounted 
to £767m, equivalent to 2R per 
cent of total .loans. 

If Lloyds were to match Citi- 
corp. the cost would be equiva- 
lent to well over half this year’s 
expected profits, again mak i ng 
dramatic action most unlikely. 

Both Barclays and NatWest 
have «ra*iiw exposures to the 
Third World debt problem. 

Mr Peter Leslie, the manag- 
ing director of Barclays, said 
last night that Barclays regu- 
larly looks at its exposures and 
builds up its reserves as it sees 
necessary. “ Every bank must 
read this in its own way,” he 

The other factor weighing In 
the equation is the progress 
British banks have made in in- 
creasing their capital resources, 
as this also makes them better 
able to withstand losses. 

The exception here is Mid- 
land whose reserves were de- 
pleted by losses suffered 
through Crocker National Bank. 

There was renewed specula- 
tion in the markets this week 
that Midland will shortly make 
a rights Issue, though any such 
plans may well have been 
affected by the Citicorp 

Brodersohn serves up a financin g menu 

Argentina's Treasury Secretary, 
is offering banks what he hopes 
will be a tempting meal. He 
wants them to devour it quickly. 

The bespectacled, pipe-smok- 
ing official, who has the air of 
an affable intellectual and a 
strong theoretical grasp of the 
developing world's debt prob- 
lem, has turned salesman - 

At meetings with bankers 
around the world, he has been 
urging them — with the help of 
International Monetary Fund 
and World Bank officials as well 
as leading bankers — to accept 
his country's 932bn bank financ- 
ing package. 

The request for a $30bn re- 
scheduling and 9L95bn new 
loan is a crucial test of the 
“menu” approach, under which 
banks and the borrower offer 
each other a range of alterna- 
tive financing options. 

The hors d’oeuvre, Mr 
Brodersohn quipped yesterday. 
Is a juicy incentive fee for 
banks which commit themselves 
quickly. The main course in- 
cludes what is known as a 
“carve-out.” And for dessert; 
“ exit" bonds. 

All these are innovative 
elements of a package which 
was already something of a 

move ‘not 
a precedent’ 

By Stewart Renting, US Editor, 
in Washington 

IN apparently co-ordinated 
statements, US and bank 
regulatory officials in Wash- 
ington stressed that although 
Citicorp had discussed its 
move over Third World loans 
with bank regulators and the 
treasury, ft had made the 
dedshm on Its own without 
setting a precedent for other 


The move was made 
•entirely at Citicorp's initia- 
tive” the Federal Reserve 
Board said. " It was their own 
judgment of what ldsd of 
reserve positions they should 
make. We don't consider this 
to be a precedent for other 

The Fed noted Citicorp'S 
statement it would con- 
tinue to support the Baker 
initiative on Third World 
debt and stressed the import- 
ance of banks continuing to 
watat - funds available to 
borrowers '‘where appropri- 

Some monetary offldala 
wondered, however, what the 
implications of the Citicorp 
move "right be tor rite debt 
strategy. If. as Is widely 
assumed, other major banks 
which are suffideMfiy strong 
financially follow suit. 

According to one official, 
the Citicorp move does not 
alter the underlying economic 
realities of the debt situation 
but, not least because of the 
dramatic character of the 
move, tt could change 

It could make It more diffi- 
cult than it already Is to put 
together big involuntary 
lending consortia for develop- 
ing countries and It might 
accelerate the tendency of 
tanks to drop out of lending 
consortia, one official agreed. 

The Citicorp decision was 
seen as a move which would 
tend to strengthen the bank 
In negotiations with Third 
World borrowers. “You can 
be tougher " in negotiations 
with debtor nations, one US 
official suggested. 

Ales Nicoll on 
Argentine efforts 
to secure a 
$32bn package 
with bankers 

watershed and has taken on 
added significance since Citi- 
corp, which heads Argentina's 
advisory committee' organising 
the deal, adopted its new 
approach to Third World debt 
this week. 

All parties to the five-year- 
old debt crisis have accepted— 
with the painfully slow arrange- 
ment of a g7bn loan for Mexico 
and Brazil’s slide into new, as 
yet unresolved, payments prob- 
lems — that the format of 
rescue packages was In need of 
drastic overhaul. 

Mr Brodersohn has spoken 
not only of the need to find a 
longer-term solution to the 
problem erf transfers of re- 
sources, but to speed up the 
procedures of existing 

Argentina, he points out, set 

out on the road to refinancing 
last autumn when it opened 
negotiations with the IMF, and 
la awaiting the commitments of 
banks to their package before 
it can receive OCF money. 

Hence the elements of the 
Argentine bank package, which 
could prove a model for other 
countries. They include: 

• Fees of { of a percentage 
point if banks commit to pro- 
vide new loans of 91.99bn by 
June 17 and i by July 17. 

• The “ carve-out.” This means 
that all Argentina's bank debt 
is being rescheduled instead of 
a- situation whereby loans 
mature in certain years. Aregn- 
tina thus obtains a true seven- 
year grace at the beginning 
of the 18-year rescheduling, and 
scaled repayments of principal 
increasing ea<*fr year so that 
58 per cent of the 332bn will 
be repayable after the year 

• Debt-equity swaps. Though 
these are by no means new. the 
Argentine plan Is extensive and 
linked in with other elements. 
It requires debt-holders to put 
In an additional 91 of "match- 
ing funds” for each 91 face 
value of debt swapped, but pro- 
vides alternative means tor the 
new money to be put in. 

The principal course 
for banks is a 
‘carve-out,’ with 
exit bonds offered 
as a tasty dessert 

• One of these is through a 
9350m investment fund which 
can use money advanced under 
the new loans. 

• “Exit bonds.” Banks are 
being offered, up to a n»^Timnm 
of 95m each, 25-year, 4 per cent 
bearer bonds which would 
terminate their exposure, mean- 
ing that the debt replaced in 
tills way would never again 
become subject to rescheduling 
oi new money requests. 

• “ New money bonds.” Banks 
may elect to make the new loan, 
np to a maximum of 91m each, 
in the form of bearer bonds 
with the same terms as the new 
loan, similarly immune from 
rescheduling. This is aimed at 
small banks reluctant to take 
part in new loans. 

Though most bankers do not 

question the concept of the 
package, they want to be sure 
that Argentina’s economy is 
still on track and have been 
watching negotiations on was-ts 
with concern. Mr Brodersohn 
has high hopes that the wage/ 
price freeze can be lifted with- 
out an -explosion in both, and 
that this should be achieved 
“ without too much social 

Banks, mindful of the Mexi- 
can loan, are also concerned 
about “ free riders " — banks 
which refuse to take part but 
must continue to be paid in- 
terest on old loans out of money 
lent by banks which do take 
part. In Argentina's case, there 
are fewer US regional banks. 
Also, there Is almost no 
“ cushion banks have all been 
asked to up 9 per cent of tbelr 
asked to put op 9 per cent of 
their exposure, and unless they 
all do so, the $l.95bn new 
money target will not be met. 

While banks assess their re- 
sponse, Mr Brodersohn can sit 
back at least for a moment. 
After visiting Tokyo, Washing- 
ton, Toronto, Paris and Frank- 
furt last week, he is taking a 
day off in Rome tomorrow after 
completing three days of talks 
in Paris. 

| Stephen Fidler examines the growing trend towards trading in debt 

Loan market emerges from twilight 

THE VEIL is slowly being 
lifted on the trading of Third 
World bank loans, a market of 
high risk and potentially huge 

The market emerged soon 
after Mexico triggered the first 
wave of the Latin American 
debt crisis by declaring in 
August 1982 that it could not 
meet its foreign loan obliga- 

It represents one strand in a 
huge shift over the last five 
years towards the transfer of 
capital through the securities 
market rather than via banks. 
Banks have become increasingly 
discontent with their tradi- 
tional role of making loans and 
holding them, but have sought 
to pass on the risk of the loans 
to others. 

Its move into the public eye 
comes as the view of the mar- 
ket has shifted. Originally seen 
as a source of embarrassment to 
banks struggling to maintain 
tiie value of their portfolios of 
loans to less-developed coun- 
tries. the market is increasingly 
considered' * weapon In an 
armoury af possible methods to 
tackle tiie crisis. 

When Citicorp declared on 
Tuesday that It would boost Its 
loan loss reserves by S3 bn, Mr 
John Reed, its chairman, said 
the bank would engage in debt- 
equity swaps, sell debt at a dis- 
count and "trade out its port- 
folio” to help “reliquify” its 
Third World loans. 

The prospect of extra supply 
of loans from US banks could 
be expected to hit prices in the 
secondary market, even though " 
Citicorp’s move might help to 
break tiie logjam which Is stand- 
ing in the way of solutions to 
the debt crisis. 

Indicative of tiie market's 
emergence out of the twilight, 
the US investment bank, Salo- 
mon Brothers, last week pub- 
lished a table of prices of Third 
World debt, which it plans to 
issue weekly. Two of the eight 
dealers trading LDC assets in 
its high yield department gave 
a press conference in New York 
to explain their market 














Prices of May 18. Perc entage of 
loon face value. 

Source: Smfomm Brothers 

Since it cannot be assumed 
that the countries concerned 
will meet their c o n tr act u al 
terms;, the njarket Is almost 
never discussed on the basis of 
yields. But potential rewards 
are as high as the risks; 

If Poland, tor wmmp ia , keeps 
to its current repayments sche- 
dule, the annual yield on its 
loans at current secondary 
market prices would be a huge 

Mexico's debt would yield 
seven to 7.5 points over inter- 
bank rates if it repays on time. 
If it does not that margin 
would fell to &5 to six points. 

According to Mr Stephen 
Dizard and Mr Kenneth Tell- 
Johann of Salomon, by far the 
most actively-traded debt is that 
of Mexico and Chile. This Is 
largely because of the active 
debt-equity swap programmes 
being run by tiie two countries, 
which have encouraged non- 
financial companies to bay debt 
In the secondary market so they 
can invest there. 

They estimate that total trad- 
ing volume in the market, which 
Is based in New York and Lon- 
don. could rearii $10bn to $15bu 
in 1987, compared with $8bn in 
1986 and $Ibn to $2bn in 1982- 
1983. Each trade in the market 
is worth on average about 93m. 
they say, although Salomon says 
its average is closer to 97m. 

Trading is also becoming in- 
creasingly sophisticated, and 
three or more parties are com- 
monly involved -in complicated 
asset swaps. . Arbitrage, allow- 
ing banks to profit between the 
price differences. . between the 
markets in new and existing 
loans, has also been common. 

There have even been swaps 
between LDC loans and other 
between these two markets has 

Banks have become increasingly discontent with 
their traditional role of making loans and 
holding them, and have sought to pass on 
the risk of the loans to others 

45 percentage points over the 
banks' cost of funds. Even if 
it were to reschedule indefin- 
itely but keep current on 
interest, the yield would still 
exceed 15 points over interbank 

high-yielding instruments, such 
as perpetual floating rate notes. 
The market in perpetuals, in- 
struments issued by banks with 
no final maturity, dried up last 
year and prices plunged. An 
estimated 5150m In switches 

been made but the interest is 
now primarily in acquiring the 

Trading also exists in ex- 
pected interest payments. The 
futures market in interest pay- 
ments by Brazil— which sus- 
pended them in February — 
trades at a higher price than 
the underlying debt because of 
the expectation that it is more 
likely to be repaid. 

Some 250 commercial and in- 
vestment banks and about 50 
n on-financial companies are 
said to be involved in the mar- 
ket. Trading is relatively active 
in debt of about a dozen coun- 
tries, but the debt of another 
23 are traded. 

The market is felt to offer 
hope to some countries for a 
way out of their debt predica- 
ment "The market is making 
countries more aware of manag- 
ing their debt” said Mr Tell- 

Bolivia is the only state known 
to be working on a plan, in its 
case to be funded by Western 
governments, to buy baric its 
debt in the secondary market, 
where it is currently priced at 
about 10 per cent of its face 

Despite concern that the 
market might be manipulated 
fay debtor countries, there is no 
evidence that this has happened 
so tor, nor any support for 
rumours that some governments 
have been secretly buying back 
some of their debt through the 

There are other problems. 
One of tiie thorniest is that of 
the so*alled contamination of 
bank portfolios— the risk that 
growth in the market may mean 
that bank loans, like securities 
holdings, would have to be 
written down to reflect their 
market value. 

In the US, a view seems to 
be developing among account- 
ants that marking to market in 
this way should only be 
required if a loan sale indicated 
either that the whole of a 
bank's portfolio in that 
country's debt would be sold, or 
that the portfolio would never 
be collected. 


Sandinista forces drive 
Contras into Honduras 


THE SANDINISTA army has driv- 
el several hundred “Contra’* guer- 
rillas back into neighbouring Hon- 
duras, and seized a camp the rebels 
had established inside Nicaragua 
during its biggest ever operation. 

But the assault appears to have 
served more political than military 
purposes, according to military ex- 
perts here, who do not see the inci- 
dent as a major setback for the 

Marshalling over 3,000 troops and 
36 helicopters, the Sandinista army 
last week stormed rebel positions in 
the Bocay Valley, one of the most 
remote and inaccessible areas in all 
of Nicaragua, dose to the Honduran 

In recent weeks, the Contras had 
taken a steady stream of foreign 
journalists into the region, showing 
off their ramp at Ananias to il- 
lustrate their presence inside Nicar- 

“From a military point of view 
the Contras weren't doing us any 
damage there, but we were interest- 
ed from a political perspective,” a 
Sandinista army officer explained. 

In Tegucigalpa, the Honduran 
capital, a leader of the “Nicaraguan 
Democratic Force" (NDF) the larg- 
est Contra army dismissed the loss 
of the camp, which had been used 
to co-ordinate supply operations for 
guerrillas deeper inside Nicaragua. 

President Darnel Ortega 

Although Humberto Ortega, Ni- 
caragua Defence Minister Gen- 
eral, claimed his troops had killed 
around 100 Contras in tiie opera- 
tion, reporters helicoptered into the 
recuperated zone saw only two re- 
bels dead. 

It appeared that the bulk of the 
Contra force, estimated at between 
700 to 800, had slipped back into 
Honduras before the Sandinista 
troops arrived. 

This was certainly a blow to the 
rebels’ image in the US Congress, 
which is due to vote next autumn 
on an Administration request for a 
further S105m in Contra aid. 

“Many people in Washington use 
whether (the Contras) can control 
territory as a litmus test of their 
military capability* said a Western 
diplomat here. 

By thnt benchmark, military ana- 
lysts agree, the Contras cannot 
hope to succeed. But their plan in 
Bocay, according to sources dose to 
the rebel leadership, is to stretch 
the Sandmistas’ supply lines to the 
limit in far corners of the country, 
forcing thwrn to make heavy use of 
their helicopter fleet. 

The guerrillas then hope to bring 
their new “Redeye" anti-aircraft 
missiles into play against those hel- 

But the Sandinista army is not 
expected to keep large numbers of 
troops in such a remote and militar- 
ily insignificant area as Bocay for 
long, now they have achieved their 
political goal. 

Last week’s operation “was not so 
much a military as a counter- 
propaganda action, against the Con- 
tras' propaganda about their setting 
up hues inside Nicaragua,” a for- 
eign military expert said 

“If there hadn't been all that fuss, 
the Sandmistas would never have 
used all that fuel," he adds. 

bill moves 

THE SENATE Judidaiy Co mm itt e e 
has approved legislation to prohibit 
White House officials, cabinet offi- 
cers, federal judges and members 
of Congress from lobbying for an- 
other country for at least three 
years after they leave the US Gov- 
ernment, AP reports from Washing- 

The measure was passed and 
sent to the full Senate. 

"This tali will restore public confi- 
dence in government service by 
cracking down cm the abuses of 
high-ranking federal who 

sell their influence to private 
clients,” said Senator Strom Thur- 
mond, the committee ranking Re- 

Mr Michael Heaver, former 
White House deputy chief of staff, 
has been the subject of an investi- 
gation by a special prosecutor for 
his activities on behalf of foreign 
governments since he left the Gov- 

Under tiie proposed legislation, a 
three-year ban would be establish- 
ed on the government’s highest 
ranking frffiriaic — «hrnet mem- 
bers, members of congress, the top 
25 White House aides and federal 
judges - from lobbying or working 
for a foreign entity after they leave 
government service. 

Argentine guerrilla leader jailed for life 


A FORMER Argentine guerilla 
leader, Mr Mario Firmenich, 
was sentenced on Tuesday 
night to life Imprisonment by 
a Buenos Aires court. 

The one-time leader of the 
Montonero guerrilla organisa- 
tion was charged with respon- 
sibility for the kidnapping of 
Juan and Jorge born in 1974, 
and for which a US$60m 
ransom was reportedly paid. The 
Born brothers belong to a 
famous family company known 
as Bunge and Born, which has 
big Interests In the interna- 
tional grain trade. 

An ex e c u tiv e and chauffeur 
of the group died in the kid- 
napping. Mr Firmenich has 
also been declared responsible 
for this. 

The 80-year sentence comes 

in the midst of a controversy 
over government efforts to pnt 
an end to the trials of junior 
and middle ranking officers of 
the armed forces and police who 
commited human rights abuses 
during the repressive campaign 
against the guerrillas and other 
opponents of the military juntas 
during the last decade. 

The Argentine senate was due 
to go into secret session yester- 
day evening to hear reports 
from the' Defence Minister and 
head of the intelligence services 
regarding the state of unrest in 
the armed forces, before voting 
on a bill which would absolve 
all junior and middle ranks 
from responsibility for murders 
and torture carried out during 
military rule from 1978-83. 

Five leaders of the military 

juntas of that period were 
imprisoned for life in 1985. The 
bill is being pushed through the 
legislature by the government 
In an attempt to prevent a 
repetition of tiie military rebel- 
lion which took place last Easter 

In a related development, the 
three heads of. the Argentine 
armd forces declared their 
loyally to the constitution on 

Mr Firmenich’s long sentence 
will fuel the controversy. He 
was extradited from Brazil in 
1984 and under the terms of 
his extradition the prison term 
has to be limited- to SO years. 
The sentence would otherwise 
have been longer. 

However, many questions 
surround Mr Firmenich, not 
least why he handed himself 

over to the Br azili an authorities 
facilitating his extradition and 
subsequent imprisonment in 


He was originally a right-wing 
student leader in the 1960s, 
with strong Nationalist and 
Catholic roots. Within the 
Peronist movement he later 
adapted a left-wing stance and 
became a leader of the Mon- 

There is also mounting evi. 
dence that be maintained links 
with the Argentine security 
forces at the height of the 

8 161x1118 war in the early 1970s. 

e is also accused by ex- 
members of the Marxist rival 
guerrilla organisation. People's 
Revolutionary Army, for having 
set up the ambush and death 
of their leader by security 
forces in 1975. 

Defence probe dropped against General Dynamics 


GENERAL DYNAMICS, the “reasonable prospect of a sue- 
largest US defence contractor, cessful prosecution" because it 
has emerged unscathed from a did not have evidence to show 
three-year criminal Invest! ga- that executives of General 
tion Into allegations that it Dynamics’ Electric Boat dlvl- 
padded contracts to build sub* si on conspired to defraud the 
marines in the 1970s. Defence Department. 

The Administration's derision The prosecution’s difficulties 
to drop the investigation marks arose from the responsibility 
the second time it has failed to of Navy Inspectors to supervise 
bring charges of fraud against the contracts and the quality of 
General Dynamics and is sure the evidence from a key wit- 
to lead to Congressional pres- ness. 

sore for closer Pentagon super- General Dynamics, which is 
vision of contractors. based in St Louis, Missouri, 

The Justice Department said said tiie Justice Department's 
on Tuesday that there was no derision “ gives ns comfort 

after the years of allegations, 
accusations, investigation and 
adverse publicity." 

But the failure of the case at 
once ran into Congressional 
criticism. Mr John Ringell, a 
Democrat congressman who 
heads the House Energy and 
Commerce Committee, said he 
planned to bold hearings on 
tbe “ apparent acquiescence " of 
military officials "In overruns 
and other abuses by their 

The original inquiry was 
launched in 1979 and concerned 
a Pentagon payment of 9544m 

cost overruns an a 
BlBbn contract for building 
Aofides^lass submarines. 
,o«t. 1 . nqulry w “ dr °PPed in 
“ 81 but reopened in 1984 when 
Mr Takis Veliotis, a former 
executive at Electric Boat, 
P?roed over tapes which 
purported to show that the 
company misled the Pentagon 
over cost overran*. 

♦v2?M Pr Sf e 5 u L ion was anxious 
that Mr Veliotis, who lives In 
Greece, wonl<* demand 
immunity from pi — ecu tion and 
be discredited in the eyes of a 



Financial Times Thursday May 21 1987 




orders fall 

by 58% 

By Havin' Brawn, 

Transport C or respondent 

JAPANESE shipyards won 
58-2 per cent fewer orders in 
April than in the previous 
month, according to. figures 
from Japan's Ministry of 

The ministry said the volume 
of new orders fell from 455,953 
gross tons in March to 182350 
gross tons in April. This was a 
fall of 163 per cent since April 

The figures Indicate Hut the 
21 Japanese shipbuilding 
groups are continuing to bear 
the brunt of the prolonged 
recession in world merchant 
shipbuilding, partly because of 
the continued strength of the 
yen against the US dollar. 

Figures published by Lloyd’s 
Register of Shipping, the inde- 
pendent London-based classifi- 
cation society, show that the 
world OTder book fell by S3 
per cent in the first three 
months of 1987. 

Lloyd's said total orders 
amounted to 2039m tons gross, 
a decline of 771393 tons dur- 
ing the quarter. This compares 
with total world orders of more 
than 3im tons two years ' ago. 

New orders placed during the 
quarter amounted to 3.4m gross 
tons, approximately 03m tons 
less than output. Lloyd's said. 

Japan suffered a loss of 132m 
gross tons in total orders, to 
4.94m tons. Other major losers 
were Spain— down 107343 tons 
to 375, S95;-Fran<se— down 36330 
tons to 284.445 tons; the UK — 
down 31,449 tons to 262,407 
tons; East Germany — down 
26360 tons to 537,067 tons; 
India— down 21383 tons to 
479390 tons: and Yugoslavia — 
down 10382 tons to 131m tons. 

The People's Republic of 
China recorded a loss of 26,780 
tons to 685,383 tons, while 
Taiwan increased its total order 
book by 18,429 tons to 609329 

The biggest increase was re- 
corded by South Korea, which 
improved its order book by 
240303 tons to 4.40m. Other 
major increases were recorded 
by Italy— up 397,968 tons to 
138m tons: West Germany — up 
123305 tons to 623,015 tons; 
Poland — up 135356 tons to 
977,676 tons: Brazil— up 71327 
toais to 860,065 Coos; Finland— 
up 97390 tons to 454,953 tpos: 
and Denmark— up 12,091 tons ; 
to 612,752 tons. I 

US set to resist Tokyo plans for global chip deal 


PROPOSALS reportedly being 
drawn up by the Japanese for 
a new international .semicon- 
ductor trade agreement would 

meet strong resistance in the 
US, officials said yesterday.-: . 

US industry and government 
officials stressed, however, that 
Japan had not tabled the pro- 
posals in' Washington, wither 
officially, or unofficially. 

They said that the reported 
proposals for a global chip 
trade agreement based upon 
floor prices and quotas 
amounted to little more than 

an. expansion of the position 

adopted by Japanese -officials 
In talks which led to last 
September’s semiconductor 
agreement between the two 

- The Semiconductor Industry 
Association, an influential trade- 
group that has represented US 
chlpmakers throughout toe cur- 
rent trade dispute, stressed that 
tt has always been and remains 
strongly opposed to industry, 
wide floor prices or any quanti- 
tative restrictions upon, semi- 
conductor trade. - Any such 
arrangement would be 

to semiconductor buyers, toe 
SIA maintains. • 

US trade officials consistently 
rejected Japanese offers to im- 
pose price floors and regulate 
production " throughout last 
year's negotiations. Instead, the 
US insisted upon 44 fair market 
value ” pricing on a company 
by company basis which is tor 
tended to ensure that efficient 
producers maintain a market 

In Washington, proposals for 
any international semiconductor 
trade agreement are unlikely to 
be entertained until the c urrent 
dispute over implementation of 
the bilateral pact is settled. 
Last month President Reagan 
imposed 3300m in tariffs on 
selected goods. 

US and Japanese trade 
officials are scheduled to meet 
in Washington next week to 
“exchange data” on Japanese 
memory chip exports and 
prices. The Japanese hope that 
these talks will lead to the lift- 
ing of toe tariffs, but toe US 
appears to be in no burry. 

Japan's apparent intention to 
include European and South- 

JAPAN IS to p r e se n t the US 
with statistics suggesting that 
Imports are winning a grow- 
ing share of toe Japanese 
computer chips market, 
AP-DJ reports from Tokyo. 

It will introduce toe data 
at bilateral fvifcy in Washing- 
ton next week to determine 
whether Japan is honouring 
a semiconductor agreement 
reached with toe US last 
September. The accord re- 
quires Japan to Increase toe 
market share of US computer 
chips and to prevent the 
dumping of Japanese semi- 
conductors overseas. 

The US . has imposed 
punitive 100 per cent tariffs 
on Japanese electronic goods 
Wm» p ers o na l com p uters and 
televisions In retaliation for 
Japan's .. alleged failure to 
abide by the accord. 

Japan is hoping the talks 
will lead to the tariffs being 

The Japanese statistics 
compiled by toe Ministry of 
Interna tional Trade ami In- 
dustry, show toe share of 
foreign-made chips in toe 
Japanese market growing 
steadily. The national news- 
paper, MaiwbM Shimbum, 
said toe share was 12 per 
cent In April and 123 per 
eeat in March. In the six 
months from last April, it 
was 10.1 per cent. 

The newspaper said also 
the ministry had found 
Japanese 256-kfls hit com- 
puter memory chips were 
being sold for about 623, 
near the fair market value 
calculated by the US Com- 
merce Department 

East Asian semiconductor pro- 
ducers in proposals for an inter- 
national trade pact has brought 
mixed reactions in the US- It 
is, said industry trade experts. 

"an issue that has never been 
raised before." 

While such a proposal could 
raise toe "interesting" possibi- 
lity of discussions on high tech- 

nology trade at toe next GATT 
round, it seems unlikely that 
the US would have much to 
gain from an international semi- 
conductor trade pact, officials 

The proposals are most likely 
intended to probe European and 
US attitudes on the issue of 
regulating international semi- 
conductor trade. a close 
observer of the trade dispute 

Initial reactions from the 
semiconductor industry were not 
enthusiastic. Hie US-Japanese 
trade pact was, they point, out, 
a response to two specific trade 
problems: Japanese damping 
and the apparent refusal of 
Japanese companies to purchase 
foreign chips. Neither problem 
exists in any other chip-produc- 
ing country. 

The US industry would also 
he opposed to being included in 
any price monitoring system. 
While it is reasonable, they 
say, to impose price monitoring 
upon Japanese companies that 
have a history of dumping, it is 
not reasonable to impose such 

burdens upon US or other 
foreign companies that have not 
been found to have dumped 
chips below fair value. 

US industry officials also 
expressed concern that it might 
take a long time to hammer out 
an International agreement 
They fear that such negotia- 
tions could delay progress in 
implementing the current 
bilateral pact. 

US industry excutlves are 
becoming increasingly optimis- 
tic that the existing bilateral 
pact can be made to work. They 
acknowledge that dumping by 
Japanese producers in third 
country markets has virtually 
ceased and some report a 
significant increase in orders 
from Japan. 

Both government and industry 
executives reject suggestions 
that Japan might cancel the 
bilateral trade agreement if 
proposals for an international 
agreement were rejected. Any 
such action would be sure to 
meet with strong Congressional 
retaliation against Japan, they 

Hong Kong exporters 
claim breakthrough 


HONG KONG'S exporters believe 
they have made a" significant 
breakthrough in penetrating the 
Japanese market for luxury 
consumer goods with first quar- 
ter exports rising to HKglSbn, 
68 -per cent higher than last 

Although overall trade with 
Japan remains in substantial 
deficit, the growth in exports, 
which follows a 39 per cent 
increase for 1988 as a whole, is 
seen as evidence that Japan's 
import market is not as 
restricted as western exporters 
often . 

The export trend is regarded 
as a consequence of toe steep 
rise in value of toe yen as well 
as toe fruit of promotion of 
Hong -Kong by toe territory's 
Trade Development Council in 
helping to foster an image of 
quality for Hong Kong goods 

Exporters say that doing 
business with Japan is still not 
easy, but it has become more 
attractive for textile manufao-' 
turers as they, run up against 

quota restrictions on sales to 
the US. Japan has no -textiles 
quotas. • , 

According to Mr Kuang-Piu 
Qiao, chairman of the Novel 
Enterprises textiles group 
whose sales to Japan accounted 
for 9 per cent of turnover or 
HKJlOOzn last year, Japanese 
buyers are less concerned with 
price than quality control over 
which they are “ very demand- 

Novel's success in selling to 
Japan is the fruit of long 
efforts, starting in 1958 when 
Mr Chao sent his eldest son to 
Japan to learn toe language. 
Now junior sales and technical 
staff are being taught Japanese 
because “ it is at this level in 
Japan that decisions are made.** 

Leading the list of Hoag 
Kong products sold in Japan 
last year were fur garments, 
sales of which jumped 50 per 
cent to HK$L6bn. Sales of 
other garmen ts rose 32' per 
cent to nAsriOSm, but watches 
and docks, where Hong Ktrag 
firms face strong co mp et i t i on 
within Japan itself, also rose 
by 45 per cent to HK$571m. 

Economy aero 
engine tested 
on airliner 

By Lynton McLain 

McDonnell douglas, toe 
US aircraft manufacturer, has 
flown for toe first time a modi- 
fied MD-80 airliner powered by 
a General Electric unducted 
fan engine. 

McDonnell Douglas said toe 
flight was the first test of an 
unducted fan engine mounted 
on an aircraft that could use 
this type of engine in commer- 
cial operations. 

The engine has two large 
fans, rotating in opposite direc- 
tions, to push aircraft through 
the air at speeds comparable 
with those of conventionally jet 
powered airliners, but using 
about half the fueL 
The nndneted fan engine 
offers potential reductions of 
up to 25 per cent in fuel con- 
sumption compared with the 
predictions for the most ad- 
vanced versions of turbofan 
engines and up to 40 per cent 
to 50 per cent below existing 

GE said toe engine could 
enter commercial airline service 
in 1991. McDonnell Douglas is 
pluming the MD-91X, a UDF- 
powered derivative of toe MD- 
80 series of aircraft, with be- 
tween 115 and 130 seats. 

Van Hool challenges Thai rebuff 


VAN HOOL, the Belgian bus 
manufacturer, is challengingv a 
Thai cabinet decision to scrap 
a leasing contract for 300 arti- 
culated air-conditioned buses. 

Belgium diplomats in Bang- 
kok are handling the affair 
cautiously, but on Monday, the 
Belgian minister for foreign 
trade, Mr Herman de Croo, 
asked toe Thai ambassador in 
Brussels to explain thesituation. 

Two Van Hool executives 
arrived in Bangkok yesterday 
to seek clarification about last 
week’s decision. 

On Monday a Flemish news- 

paper carried a report ques- 
tioning Thailand's seriousness 
as a trading partner. Such re- 
ports are unlikely to be treated 
sympathetically by ministers in 

The Thai cabinet decided on 
May 12 to go ahead with a 
seven-year leasing contracts for 
1300 locally assembled buses— 
300 Hino, 300 Isuzu, 500 
Daewoo and 100 Mercedes Benz 
buses. But it rejected toe Van 
Hool contract saying the DM 
236.9m cash price for toe 300 
buses was too high. 

All toe contracts were signed 

on August 7 but were immedi- 
ately suspended and re-negoti- 
ated. They are controversial be- 
cause of toe speed and secrecy 
in which they were concluded 

Van Hool has been trying for 
six years to supply buses to 
the debt-ridden Bangkok Mass 
Transit Authority. It argues 
that the quality of its buses 
justifies the high cost of the 

Thailand remains attractive 
for private investment projects, 
but the government's much 
praised fiscal caution has held 
up public sector projects. 

EC and Efta scrap more trade barriers 

TWO NEW STEPS towards toe 
scrapping of trade barriers 
between the European Com- 
munity and Efta, toe European 
Free Trade Area, were formally 
signed in Interlaken, Switzer- 
land, yesterday, our Brussels 
staff writes. 

The first agreement will 
extend, the use of a single 
import, export and t ransi t 
document — the so-called single 
administrative document — from 
the 12 EC states to include toe 
six members of Efta. 

Ministers of toe Efta 
countries — Austria, Finland, 
Norway, Iceland, Sweden and 
Switzerland — and Mr Willy De 
Clercq, EC external relation 
commissioner, also signed a 
convention to apply a common 
procedure for goods in transit 
between any of their respective 
members, and within Efta. 

Mr De Clercq called for 
greater efforts to remove 
barriers to trade in other areas, 
such as allowing greater access 
to public purchasing contracts 

across borders, and the elimina- 
tion of remaining quantitative 
export restrictions. 

The Efta states have become 
Increasingly concerned that the 
Community's aim of removing 
all barriers to internal trade 
by 1992 will leave them very 
much second - best in the 
European free trade area — a 
concern which has caused 
industrial lobbies in both 
Norway and Austria to raise 
again the possibility of apply- 
ing for full EC membership. 

try to defuse 
free trade 
deal row 

By Bernard Simon In Toronto 

negotiators have set up a 
special working party on 
Canada's foreign investment 
policies in an effort to resolve 
a major stumbling block in the 
year-old talks on a US-Cansda 
free trade agreement. 

Washington has thrown a 
spanner into the works by de- 
manding that Canada reduce 
barriers to foreign investment 
as part of the free trar? 

Mr Simon Reisman, Canada's 
chief negotiator, said after a 
meeting between the two teams 
outside Ottawa, that this was a 
matter of extreme importance 
to them. He said US cabinet 
members, as well as President 
Reagan, had raised the invest- 
ment issue in recent meetings 
with their Canadian counter- 

The US demands come at an 
awkward time for the 
Canadians. Foreign investment 
has re-emerged as a delicate 
political issue in the wake of 
several large foreign takeovers 
of Canadian companies, notably 
the C$5.2bn bid by Amoco, the 
US oil group, for the troubled 
Calgary-based energy producer. 
Dome Petroleum. 

Ironically, the Progressive 
Conservative government in 
Ottawa has made the attraction 
of foreign investment a corner- 
stone of its economic policies 
since taking office in Septem- 
ber 1984. It has reversed many 
of the restrictive measures, 
especially in the energy sector, 
put in place by the previous 
Liberal Government. 

One view is that Washington 
bas raised the investment issue 
in toe trade talks to counter 
Canada's key demand for 
exemption from US protec- 
tionist measures, notably its 
trade remedy law. 

Mr Reisman said there were 
still 41 some big rocks to move " 
in toe free trade negotiations. 
Earlier hopes that a draft 
agreement would be drawn up 
by late June have faded. 

On toe other hand, an accord 
must be approved by Congress 
before January 1988, when toe 
“ fast-track ” negotiating man- 
date given to the Reagan 
Administration expires. 

V «»' 


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Financial Times Thursday May 21 1987 


In rift with 

By David Brimfi* 

THE UNEASY relations 
between Hr Nefl Ktanock, 
the Labour leader, aid Fleet 
Street fait a fnsfa knr yester- 
day at about the time 
celebrity status was con- 
ferred an Hn Amy Sherratt. 

Hr Ktanock’s officials, and 
the leader himself, matte no 
secret that their patience has 
been sorely tried fay many of 
the nattoaud newspapers and 
that tdeWdoa gets priority 
during th e campaign. 

After two days ate the road, 
there Is already simmering 
discontent among the “writ- 
ing press" (as the tnvelHag 
newspaper representatives 
are known by Hr Ktanock*s 
aides) at the return they are 
getting far the £3£00, not 
Including food mid accom- 
modation, they are each paw- 
ing for accompanying the 
leader’s c ar av a n. 

Mrs Sbemtt brought the 
complaints of both sides into 
stark foots. Arriving yester- 
day at an Information tech- 
nology training centre In 
Bury. Lancashire, the news- 
p^er reporters spotted the 
72-year-old widow sitting out- 
side her council boose aem 
by, which displayed a Tory 
eledlen poster. 

Interviewed, die said: “I 
receive rent and rates rebates 
and housing subsidy, and 
with that 1 am better off than 
ever I have been 1 a my Ufe 
— and yon can tell Hr 
Ktamock that If yoo wish. 

“ If every pensioner la 
this country told the troth, 
they would say the same as 

The attention given to Hn 
Sherrattis forthright views 
dismayed the KinnoCk 
But It was hardly surprising, 
given that the newspaper 
Journalists wore told there 
would be room for only two 
of them to Join a tour of a 
tn&ifng centre — the tele- 
vision crews taking 

The writers say that their 
grievances are not Just 
special pleading; but that 
Labour fa making a serious 
tactical error hi concentrat- 
ing an hmocaoos “film aid 
photo opportunities ” like Mr 
Hmocft three workplace 
visits yesterday. 

Indeed, the leader 
appeared at hfa most effective 
yesterday in brief un- 
scheduled conversations with 
bystanders. However, party 
officiate say planned walk- 
abouts would simply become 
media scrummages. 

TUC urges 
support for 

By PhiHp Bassett 

THE TRADES Union Con- 
gress yesterday urged people 
to vote for Labour as the 
best hope for |@fej and for 
combating poverty. 

Although Labour and the 
unions are widely seen at con- 
nected, the endorsement of 
Labour by the TUC general 
council fa significant given 
the public distancing of the 
party from the unions by 
some Labour leaders In the 
run-up to the election. 

Hr Norman Willis. TUC 
general secretary, stressing 
that the onions had “ ferged 
an understanding " with Lab- 
our on the economy and law, 
said: “ It is the Labour Party 
that offers fresh hope in place 
of growing divisions and de- 
cline. They deserve the con- 
fidence and support of the 
British people.” 

Members of the local gov- 
ernment union Nalgo, which 
fa not affiliated to Labour, and 
Hr John Lyons, general secre- 
tary of the Engineers' and 
Managers* Association, who Is 
an individual member of the 
SDP, abstained from voting. 

Three Civil Sendee unions 
which are also not affiliated 
to Labour did support the 
TUCs endorsement. 

Hr Willis rejected the sug- 
gestion that, because 61 per 
cent of trade union members 
voted hi the 1983 election for 
parties other than Labour, the 
TUG'S endorsement was out 
of step with union members' 

Labour leads 
in poll of 
the young 

LABOUR has a seven-point 
lead over the Conservatives 
in an opinion poll carried out 
among young people for the 
Transport and General 
Workers’ Union. 

The NOF pelL covering 510 
young people between IS aud 
24, gives Labour 37 per cent, 
compared with 30 per cent 
for the Conservatives and 27 
per cent for the Alliance. A 
fifth of the sample were trade 
nnlon members. 

.. The poll found that 56 per 
cent of the young people 
thought trade unions bene- 
fited their members. A total 
of 74 per cent thought that 
youngsters were “exploited " 
bv being cheaply employed mi 
lbs Government's Youth 
Training Scheme. 

- ■ ' 

i jrt r,* 

>>-■ . ijr* 

Mika Arran 

Time for a change— Neil Kbmock gets set to leave a Manche s ter press conference yester- 
day. With him (from left) are: John Prescott, Rill Jordan and Barbara Castle 

Tories would not cut dole 
queues, Kinnock claims 


BE LABOUR leadership admission that they could not moral duty, but because the 

and would not ease unemploy- nation could not afford to 

THE LABOUR leadership admission tha 
yesterday conce n trated its and would not ease unemploy- nation could not afford to 
attack on the Government’s ment, he said. squander its most precious 

record on unemployment, with Mr Hattersley accused the asset. 

Hr Neil Kinnock, the party Government of deliberately Hr Giles Radice, the shadow 
leader, cla iming that the Con- creating unemployment and Education Secretary, said on- 
servatives could not and would keeping it high. “The economy employed building workers 
not reduce the dole queues and they choose to run on behalf of would be put back to work to 
Hr Boy Hattersley, his deputy, their friends and patrons re- tackle the $500m backlog of 
accu s in g Mrs Thatcher of Quires, high levels of on employ- repairs to school buildings. 

Hr Neil Kinnock, the party Government of deliberately 
leader, claiming that the Con- creating unemployment and 



deliberately keeping uuemploy- ment just as it required an end Mr John Smit h , the shadow 

ment high. 

to manufacturing industry and Trade and Industry Secretary, 

Hr Kinnock picked up last this country's increasing de- said flu Government's h a n dling 

hits back 
at Owen 

By Phffip R iw tte tna 

HRS THATCHER yesterday 
angry protests from 
SDP leader Dr David Owen 
about the Conservatives mani- 
festo's “slur" on ' (he 
Alliance in describing its 
defence policy as “one-sided 
disarmament by da f a u lt «r 

The Prime Minister told 
Dr Owen: “On this crucial 
defence issue there fa little 
tq choose between Labour 
■fid the SDP-Liberafa.” 

In a letter to Mrs Thatcher, 
Dr Owen bad dema n d ed a 
retraction and correction of 
toe statement which Implied 
“ **»■* we would take Hifa 
c ountry ... down the same 
disastrous road as the Labour 
Party towards a frightened 
and f enow-travelling Britain." 

Dr Owen wrote: “It brings 
dishonour on your office for 
yen to campaign, during an 
election as Prime Minister on 
such a deeply offensive 

“It offends not lust the 
members of the two parties of 

nwr AlHanff but the millions 

of people in this country who 
vote for us and support us.' 

Both Dr Owen and lb 
David Steel, toe liberal 

week’s comment by the Prime Pcpdence on the City of London, of (be Austin Rover Group leader, bad condemned toe 
Minister that she Intended to * Ith J* sleazy undercurrent of proved that the Tories “simply “slur" at toeir morning press 
“go on and on” when he said an &. lt * cannot be trusted to secure the conference. Dr Owen attached 

hat am- »r the rest of the future of the motor vehicle 

“go on and on" when he said 

that, if she achieved that am- f0 

bition, the country would "go ecODOmy ' 

on and cm paying a bill of 
£21bn a year for idleness." 

Repeating Labour’s charge 

He toll 

d members of Ucatt, toe 

During a day campaigning ferred 

that the Government had inter- building workers' union: “ They 

unemployment almost succeeded in selling ARG 

In toe north-west of England, statistics, he said: “There has to Ford behind the backs of the 
he said of the Tories: "Their been a carefully organised con- employees, toe management and 
attitude fa a mixture of spiracy to hide the facts about the people of the West Midlands, 
surrender and sabotage — a both jobs and manufacturing. They were stopped In their 
complete betrayal of the During toe campaign we must tracks only by a vigorous cam- 
millions of unemployed, of the cut though toe calculated paign in parliament, by toeir 

millions more who fear un- deceit" 


internal confusion during the 

Hr Hattersley said Labour's Westland affair and by an out- 

The refusal of the Conserva- commitment to reducing unem- cry from the West Midlands. 
tives to set any target for ployment in two years was After that bitter experience, 
cutting the dole queues was an made not just because it was a who can trust to*™ again?" 

Labour alms to drop Sizewell B 


A FUTURE Labour government 
would cancel Sizewell B power 


He attacked the Conservative 

station and phase out nuclear Party's " outrageous ” proposals 

power, replacing it with coal 
and renewable energy, toe 
party announced yesterday. 
Other priorities would be to 
stimulate development in the 
North Sea and place greater 

to privatise toe electricity 
industry as “a further exomple 
of toe Tories’ short-sighted and 
wasteful approach to the 
nation's energy resources." 

prices. However, Labour 
intends to contribute to stable 
prices by discussing a 'pricing 
and depletion policy with North 
Sea oil companies. 

The planned redaction in 
dependence on nuclear power 
would be gradual and would 

The document shows some have a effect on jobs, 

emphasis on energy conser- changes from the party's pre- Mr Orme said. Within the next 
vation. ■ vious position. Hr Orme said two parliaments a Labour 

In launching “ Energy Policy that Labour would not negotiate government would have decom- 

for Two Parliaments," a 22- 
page document. Hr Stan Orme, 
Labour’s energy spokesman, 
said that for the first time in 
20 years every aspect of energy 
in the UK had been drawn 
together into a comprehensive 

with the Opec oil nations cartel; missioned some but not all of 
contradicting previous policy the old-fashioned Hagnox 
statements. s tatio n s and have tightened 

The line now fa that with pro* safety standards at the newer 
duction from the North Sea set advanced gas-cooled reactors, 
to fall, UK output is not large 'which would take " decades " to 
enough to have an Impact on phase out 

One David too few drains this Alliance 


THERE were growing Indica- 
tions last night of a serious 
split In the Alliance. 

one David too few began to 
sink in. The Alliance would 

shelter with the Raving Loonies 
and Captain Rainbow under 

plummet in the polls. It would the Alliance umbrella, includ- 
nt n rift )»»». be black armbands all round. lug the Rock the Boat Party, 

This Alliance - toe Rainbow toe Prince Charles Appreda- 
°“ e — will chase its dreams tion Party and toe One-One-One 
wtt* or without David, Scream- Party— the latter fighting on a 
jEff? Lord Sutch of the Monster platform for change of the 

SSJJ 0 L™*? Party- according emergency 999 number. 

blueprint for the ^ ^ Alliance cofeunder, Chief goal fa the abolition 

This Alliance — the Rainbow toe Prince Charles Apprecia- 
one — will chase its dreams tion Party and toe One-One-One 

bow’s Universal Party. 

More than 100 fringe parties 


vote on everything from home, 

togotat blueprint for toe aEf&rii b Sedition 

“"“"v George Weiss of Captain Rato- of parliament Everyone would 

Political pundits were thrown bow’s Universal Party. vote on everything from home, 

into a spin as the reality of More than 100 fringe parties electronically. 

Owen HUB! fan Michael C 

support dH Trying 

fOr UDM La,. j planned to rat up its own cam 

Wtt — - JH didate, the UDM cl aim s it has 

By tew Owen | been unable to overcome legal 

_ B J problems in time. Instead it 

DR DAVID OWEN, leader of p _ ^ B says its members should bock 

the Social Democrats, went any candidate who backs toe 

2,500 feet underground yester- HRfRIRHM onion. That excludes Hr Meale. 
to «««* Of TOte, to 8., Not surprising, hit Tory imd 

He reaffirmed its commitment Allinii CE _^*? ?.*"*?**" 

ALAN MEALE. the left only 2,216 votes. Intend to make 

» w Pi.y«h. ssasirttBM szsssjastjsji 

stituency tflfaLSSlssW hfa NUM and of Labour’s stand 
SSn'MX Mpr^tn « during the miners’ confront. 

during the miners* strike. jQCal Mr Meale will be denied sup- 

Dr Owen donned a yellow u. port from Mr Don Concannon, 

safety helmet and an orange ' the retiring moderate MP, who 
boilersuit to mix with the pro- »“? has criticised the man chosen 

dominantly UDM workforce and by Labour to succeed him. 

remind them that Mrs Thatcher HftJSuSL* dinner at Earlier this week, as Mr Roy 

Search party . . . Michael Headline fa checked before gotaff 
tote toe todMfatf retan g 

Thatcher claim on 
caring policies 

THE CONSERVATIVES are When Labour was last £ 

the only party which can 
deliver on caring policies, Mrs 

the Conservative* fur trying 
to give the impression that 
only they were patriotic and 
understood the national 

In her reply to Dr Owen, 
Mre Thatcher said that though 
the Liberals and SDP were 
dogmatic In stating that they 
would cancel Trident, they 
were studiously vague about 
any replacement. 

Alliance policies had failed 
to demonstrate that ft was 
capable of dealing responsibly 
with toe country’s security. 
"They would destroy our 
future deterrent force. They 
would allow our present force 
to become obsolete. You offer 
no practical or timely alterna- 

Tebbit in £590 
advert challenge 

Dkj> PI ,f[f — ft— rt.ii m»t< U i'ii , I, M. . u 

oy ramp NBwsxomv 

aervative Party chairman, yes- 
terday issued a £500 chal- 
lenge to Hr Neil Kinnock, 
the Labour leader, over the 
latst Labour election ad- 
vertisement in toe press. 

The advefttoemen quoted 
Mr Tebbit as having said: “Jf 
unemployment fa not below 
3m fat five years then Pm not 
worth re-electing.” 

Hr Tebbit, In a letter to the 
Labour leader, said: “You 
must be aware that I have re- 
peatedly denied ever using 
the words which you attri- 
buted to me ... I challenge 
you to produce a tape record- 
ing or verified transcript of 
the words in the full context 
ta which, they are supposed 
to have occurred." 

If the evidence were pro- 
duced, Hr Tebbit said he 
would pay £500 to charity. 
"If you cannot,” he told Hr 
Kinnock. “I would expect you 
to pay £500 to a charity of 
my choice or be shewn up 
publicly tor indulging in u 
blatant aud del ib erate He." 

be targeted on areas of need. 
The Prime Minister also in- 

manlfestn commitments 
housing and education. 

A STRONG attack on toe 
leadership style of Mrs 
Margaret Thatcher, the Prime 

power in her own hands, allow- 
ing the citizen only economic 
power “to. meet your own 

Minister, was launched yester- needs if yon are capable and to 
day by the leaders of the two suffer if you are not There is 

Alliance parties. 

no suggestion in her manifesto. 

Hr David Steel, toe Liberal *» ***** *! thought to her 

leader, accused her of hypocrisy 

--'wing people politi* 

min ^ * 

W? “pS ? 6 & STVs CULT& 

Oavid Owen, .the SDP laadar, g^^ te ^ n,g lffl £S 



acknowledge that her political ^ghts for some workers, cur- 

£szss*w™ - &sss it vss 

creating an atmosphere where 



Mr Steel told a rally ta ft fa understood, as she hi" said 
Cheltenham: “Thatcher power feS^toatyra are either tor 
is toe pow« to exploit and ber m against her. 

manipulate; the power 
by trampling on the ho 

er to rise 
hopes and 

"Thatcher power is the power 
of toe rich to. opt out of the 

aspirations of those less privi- community . while poverty 
leged. Thatcher power does unemployment reach record 
Pot extend to the Individual as levels. Thatcher -power is the 
citizen or t) toe community.” power to buy and capitalise on 
He said Mrs Thatcher had vital public utilities such as 
sought to conc e n t rate political electricity and water." 

Michael Cassell reports on the election battle in Mansfield 

Trying to bnry mining differences 

planned to put up its own can- 
Hare — - “v didate, the UDM cla i ms it has 

been unable to overcome legal 
■ J problems ta time. Instead it 

r m ■■Hfr mi says its members should bock 

any candidate who backs toe 
union. That excludes Mr Meale. 

Not surprisingly, hfa Tory and 
HHBflffiHHHHffi Alliance opponents, ta a con- 
stituency that Labour holds by 
MR ALAN WTRAT.F , the left- only 2^16 votes, intend to make 
wing Labour candidate for the much political capital out of 
Nottinghamshire coalfield con- Mr Heale's association with the 

stituency of Mansfield, says his 
campaign win be based on 
national policies and not on 
local personalities. 

The evidence suggests he has 
aa much chance of getting hfa 
way as Mr Arthur ScazgiU has 

NUM and of Labour's stand 
during the miners’ confronta- 

Mr Meale will be denied sup- 
port from Mr Don Concannon, 
the retiring moderate MP, who 
has criticised the man chosen 
by Labour to succeed him. 

was not toe only leading poli- 
tician to make a stand against 
the extremism of Mr Arthur 
Scargill, the President of toe 
National Union of Hineworkers. 

10 Downing Street 

Hattersley, toe party’s deputy 

jjjgjjL He has a tough fight on 
He insisted that there must hfa in a community still 
be no return to the “ old con- deeply split in the 'aftermath 
spiracy” between the National of the miners' strike that led 
Union of Mineworkera, British to the creation by Nottingham- 

Mr Meale was parliamentary le ade r , arrived ta town to pledge 
and political adviser to Sir hfa “absolute faith” ta Mr Meale 
Michael Meacher, shadow health to claim, it was ta toe best 
secretary, ta toe last parlia- interests of all miners to vote 

Coal and toe Government. 

shire miners of 

Dr Owen maintained that Union of Democratic Mtae- 
witb members of toe NUM due workers. 

to benefit from the pay increase 
negotiated by the UDM toe case 
for the TUC recognising the 
new union was overwhelming. 

About 80 per cent or Notting- 
hamshire miners belong to toe 
UDM. based in Mansfield. It 
refuses to endorse Labour 

and to was ta the best 
interests of all miners to vote 
Labour, Ur Concannon was pub- 

1983 election result Mans- 
field: J. D. Concannon (Lab) 
18.670; R. Wren (C) 1M54; 
8. Taylor (SDP) 11,036. Lab 
majority Turnout 70.7 
per cent 

Dr Owen’s attempt to demon- Sf® 1156 the party’s rapport 

strata the Alliance’s appeal to 
those who favour moderation 
and good sense appeared to be 
well received by the majority of 
those to whom he spoke. 

A demonstrably discordant 
note — a mucous rendering of 
the Red Flag by Labour Party 
stalwarts— was drowned out by 
the noise of the cage which 
carried him down the number 
one shaft of one of Britain’s 
most highly mechanised and 
profitable pita. 

licly denying the Labour cantli- least s_50n 
date his support H e YeJec 

To make matters even more selection lu 
uncertain, toe newly founded and hittera 

However, la toe 18 months 
since he was chosen to contest 
the seat, he has worked hard 
to make his mark and believes 
the tide 2s in hfa favour. Mr 
Hendry, who la 28. claims toe 
2.5 per cent swing from Labour 
to Tory ta the May poll would, 
if repeated on June 11. be 
enough to end Labour's reign 
ta Mansfield. 

He adds: “This fa an area 
where toe political map has 
been changing ta our favour. 
In 1966, when Don Concannon 
was first elected, we bed one 
seat in the area and now we 
have eight. Labour has three 
and wfll have at least one leas 
after tire election.” 

Mr Hendry acknowledges 
that the Alliance raised its 
share of the- vote in May but 
believes it fa no longer seen as 
being close enough to chal- 

lemre the oilier two narldes and 

flower power; Labour candidate Alan Meale canvassing In that voters will realise toe 
Manafield market Tories alone can see off Mr 


just heard Mr Brian Clough, the on the theme of local unity and ^ Barry Answer, a local 
manager of Nottingham Forest on the issues that hit the com- newsagent who fa standing for 

Football Club and the man who munity, like unemployment the Alliance, says toe MLP*s 

tipped Coventry for the FA Cup, 5,500 are without jobs— housing failure to make an Impact will, 
predict a Lbour victory in Mans- and health. He will also echo this time, work ta hfa favour, 
field, Mr Meale himself pre. toe warnings of other, local “We will make It clear that a 
dieted a Labour majority of at Labour candidates who eintm vote for the MLP fa a vote for 

£££» oopes to attract disencnanted he hae sought to rebuild bridges. The Tory candidate fa Mr 

Bees ^ JC , *15^° Labour supporters, has put up a He stresses that 16 members of Charing Hendry, a London 
Mr Meale as a calculated dap candidate of its own. The MLP hfa eeneral management com- onfaiic relations consultant- who 

■ .v, B i . J. candidate or its own, roe mlp hfa general management com- nubile relations consultant, who 

2JSS55*qS? I 2£ , !S2 dia badlyta the May locaielec. SUmudb ' UDMmembers IffESt riSrt fa raTthTsSritf 

? on ?r lts candidates failing claims that “the only people candidate who might be 

community. The new union tlons, its 26 candidates failing 
remains unrecognised by _t£p to win a seat, but its presence 
Labour party and by the TtJC. could still mafcp Mr Meale's tnair 
Mr Meale's mining critics more difficult, 
allege that he openly supported Despite doubts about Mr 
the NUM on the picket lines Meale’s prospects being aired at 
and has. therefore, forfeited any the bar of the New Bora ugh 
chance of support from Its Labour Club, the candidate pro- 
members. Although it originally claims total confidence. Having 

field, Mr Meale himself pre. toe warnings of other, local “We will make it clear that a 
dieted a Labour majority of at Labour candidates who claim vote for the MLP fa a vote for 
least 3,500. that the return of a Tory gov- the Tories and that toe Alliance 

He rejects the idea that hfa eminent will present the mining fa the right home for people 
selection has prolonged division industry with “the devil’s alter- seeking toe sort of moderation 
rim™* »h a fnr tho - — r— - and bitterness In toe area and native"— the -closure of the in polities to which M a ns fi e ld 

National *noi The J* odera J® “Y 18 * ^nce he was picked, that privatisation of the coalfields. has been used.” 

Nationri Union of Mtaer^ The hopes to attract disenchanted he has sought to rebuild bridges. The Tory candidate fa Mr Shortly after Mr Hattersley 

He stresses that 16 members of Charles Hendry, a London and toe media circus had left 
his general management com- public relations consultant, who town earlier this week, one 
mittee are UDM members and at first sight fa not the sort of Labour stalwart was heard to 
claims that “the only, people candidate who might be say at toe bar of the Labour 
fanning toe flames are Labour’s expected to appeal readily to Club: “It will he tough but with 
enemies.” He insists hfa support local voters. Despite hfa any luck it will not be dirty.” 
for the miners was restricted to membership of the local miners' It transpired that he was 
raising casta for toe fam ilies of welfare chib, his exuberant, referring to Manned^ Town’s 

tlons, its 26 candidates failing claims that “the only, people candidate who might be 
to win a seat, but its presence fanning toe flames are Labour's expected to appeal readily to 
could still make Mr Meale's task enemies.” He insists hfa support local voters. Despite hiw 
more difficult. for the miners was restricted to membership of the local miners’ 

__ Despite doubts about Mr raising for toe families of welfare dub, exuberant. 

Despite doubts about Hr raising cash tor toe fam ilies of welfare cub. Ids exuberant, referring to Manner Town’s 
Meale’s prospects being aired at strikers — "and I am damned if I smart-suited City image re- appearance at Wembley 
the bar of the New Bora ugh am going to apologise to anyone mains arguably out of step Sunday ta the Freight Hover 
Labour Club, toe candidate pro- tor that." with many of the down-to-earth Trophy final, but no one would 

of the 

By fohn Hunt 

THE first miracle of the elec- 
tion campaign occurred yes- 
terday when that mysterious 
body, the 1922 Committee of 
backbench Tory BPs. went 
public for tike first time In Its 

when Labour was last in 
power, . its economic policies 
“were such a failure that their 

Margaret Thatcher told about good intentions counted tor 
300 parUamratare candidates nothing. They tried to spend 

at a rally taLradon yesterday, money like confetti, so they 
In a rebutted of opposition had to print it like confetti so 
charges that her Government before long it had the ««« 
does not care about the under- value as confetti.” 
privileged, she insisted that all Among the results of this 
names cared I about tbe slck. sitnathm was a real-terms cut 
the old and the poor, but that in nurses’ pay, a cut ta the 
ZSL-ffV.' hos ® ital bowing Programme 

and lcmger lists. By 

had allowed extra resources to contrast, economic success 

under the Conservatives had 
allowed higher rates of pay for 

stated that the less well off more nurses and doctors to 
stood to benefit most from the carry out more operations and 

on reduce waiting lists. 

Mrs Thatcher said parents of 

“The choice fa not between children at lnnewaty schools 
a caring party and a non-caring stood to benefit moat from the 
one. The real choice fa between Conservative proposals to allow 
toe opposition parties, which schools to opt out of local 
wring their hands because their authority control in favour of 
economic failure hhs destroyed direct Government grants. She 
any hope of better care, and urged party members to be 
the Conservative Party that ready to hup parents prepare 
cares effectively because it can such schemes, and she insisted 
first deliver economic success.” that tenants on run-down estates 
She said Labour had for- would be toe beneficiaries of 
gotten that economic strength manifesto pledges to break up 
was needed to build social ser- council control <of municipal 
vices, but the voters had not. housing. 

PM*s leadership style 
attacked by Alliance 

Normally toe committee 
meets privately ta the House 
of Commons with political 
journalists loitering outside 
in tha hope of jficktag up a 
■Bver of information. Yester- 
day the press were Invited 
into toe library at Centre* 
Hall, Westminster, where Mrs 
Thatch er was to address her 

About 366 candidates were 
assembled: confident former 
BKPs with Mg majorities, ner- 
vous characters from uncer- 
tain marginal constituencies 
and plain aMwpen trying to 
put a cheerful face on things. 

Bouncy Peter BraJuvels, 
who tadefendtag a 913 major- 
ity ta Leicester East, was de- 
claring himself confident of a 
re t ur n to Westminster “ even 
though toe laws of averages 
say no.” 

Michael Heseltine, the form- 
er Defence Se cr e tar y who 
walked out of the Cabinet 
over toe Westland affair, was 
cheerfully announcing that he 
Intends to visit 99 eons ti ta- 
oneies itnyfay *i»f 

Serried ranks of Tory peers 
were there, the unelected who 
do- not have to face toe rig- 
ours of the democratic pro- 
cess and are tons free to roam 
at will doing their bit to see 
that their colleagues are 

At a word fro mthe ubiqui- 
tous Harvey Thomas. . Mra 
Thatcher’S Director of Presen- 
tation and Promotion, the 
ministerial *mw» trooped on 
to tiie platform looking rather 
sheepish as their names were 
boomed out for the benefit of 
the rows of television care- 
ens teM icmlfffcijj Hi hi 

First OH fee nlatflnwn was 
John Biffen, Leaderof the 
House, who was a notable 
absentee from Mrs Thatcher's 
press conference the previo us 

As befits a man who ta 
rumoured to be for the chop 
after the election, he was 
seated precariously at the 
edge of the platform. He was 
■son followed by Peter 
Walker, tiie Energy Secretary, 
who could also .become a j#y- 
ennnental nonperson. 

Despite these ungenerous 
suspiclor , Cranley Onslow, 
chairman of the 1923 Commit- 
tee, nalnfarii^ (hf ff dWnnn l 
trappings of that august body 
although he admitted that 
“we don't normally conduct 
our meetings like this.” 

The matronly Dame Jin 
Knigte was then solemnly in- 
vited to read out the minutes 
of the previous meeting of 
the 1922 Committee- At last 
the curtain was to be lifted 
on what really happens at 
these gatherings. We were 
treated to the shack horror 
revelation that the meeting 
began at 6 pm. About 276 
members were present The 
chairman bade farewell to de- 
parting BOPs. At 6.05 the 
Prime Min is t e r attended, was 
given an enthusiastic ovation 
and toe meeting closed at 

John Wakenham, toe Chief 
Whip, then warned tint mem- 
bers should be prepared te 
respond to a three-line whip 
in the Commons on July 1 
and 2. How's that for self- 
confidence at toe start of a 

The saturnine Norman Teb- 
hit, party chairman, delivered 
a few chosen words. As he 
was ta lkin g to a friendly aud- 
ience he had on Hit* occasion 
removed hfa fangs 
aside hfa black cloak. There 
was, however, a caution that 
the written could- not be re- 
garded as satisfactory nnfa 
the votes were counted and 
toe party back with a 
working majority. 

After 15 minutes came the 
culminating event of these 
carefully planned rituals — the 
regal entrance of Mrs 
Tha tcher . The 
dared up at her raptuousty 
and welcomed the leader with 
a rhythmic 

Although the style was less 
rampant than at her public 
meetings it was uffl very 
much the brisk headmistress 
lecturing the school at the 
start of the new term. Every- 
be expected to fat 
fll toeir “awesome” respon- 

The opinion polls were semi 
as the equivalent of the school 
tuck shop. Candidates should 
not be diverted from their 
*tera task by the goodies on 
display ta the window m«< 
should concentrate on putting 
tiff “ Positive, realistic, 
ima ginat ive Conservative mes- 

The pupils loved It 



Mr Ma dia says be win fight electors ha has ta win over. have guessed. 

THE KEEP Sunday Special 
2S?5 aJ *F --a coalition of 

anti-Su nday trading groups 

yesterday announced pro- 


%SS^ UBd 

‘ iJ 





Financial Times Thursday May 21 1987 

:: 'it H 

v. r 


r -\: 
■■ » •. •; 

> ,s: ; 

• /s 

v.: ,; 


Thatcher makes Teachers Building societies for freer 

linnil i ic i. oni>ao! to intensify access to financial markets 

populist appeal pre , poll ■ 

■m J 1 ■» • * THE BUILDING society movement maud without borrowing heavily Restrictions which 

as lead declines strikes | is to ask the Government for more from wholesale markets and, as a larger societies wouli 

as lead declines 

THE BUILDING society movement maud without borrowing heavily Restrictions which some of the 

is to ask the Government for more from wholesale markets and, as a larger societies would like to see 
flexibility in tapping wholesale 6- result, some are nearing the 20 per overturned include the inability to 
□andal markets. It has given a cent limit own an insurance company or a 

warning that failure to grant this Speaking at the conference, Ur stockbroker, and to divert more 
request will lead to the reappear- Roy Cox, the association’s chair- than 5 per cent of their assets to un- 
ance of mortgage queues. man, said the limit was an increas- secured lending. They also want 

First-time buyers and others at ing restriction. If it was not raised, large societies to be regulated less 
the bottom of the housing ladder societies would either have to curb tightly than smaller ones, 
would be particularly badly hurt, if their lending, sell their mortgages chanses to the association’s 


MRS THATCHER yesterday made . — - 

a populist appeal to free council te- Let— t Opinion Potto - 

nants and parents from "m unicip al Cons Lab Afl 

socialism- and to s>read capital ~ M 

ownership the centrepiece of the ^T?**®*? » 

Conservative campaign. nJKffL. ■ - 

Her remarks came as she faced a ' 

strong attack from Labour and the * unw y TV^wn 41 35 23 

Social Democratic Party Liberal Al- 
liance over the economy *»nrf her lead, and a steady potation. It looks 
style of campaign mg ami as new as. though in the battle to lead the 
opinion polls pointed to a declining opposition the Labour Party has 

Tory lead. 

slightly strengthened recently tak- 

Mrs Thatcher was giving apep- ing support from the AIKance which 
♦a fir to Conservative candidates in is firmly in third pl a ce and shp- 
the first meeting of the Tory MFs ping " * 

backbench 1922 committee open to Alliance strategists are also re- 
tire press and television. The min- lased, pointing out that its rating al- 
utes of the previous meeting were so slipped in tire first week of the 

read, and accepted. 

1983 campaign, but is stiH six: points 

Those candidates lucky enough to higher than then, 
be elected were promied a quiet few Labour leaders are also pleased 
days after the Queen’s Speech and that their campaign has got off to a 
then cabinet ministers came one by strong start, both nationally and in 
one onto tire platform, to he applan- kev target seats. They are narticu- 
ded like quiz show contestants. i^lLsed with the imraton 
Some waved, others, like Mr John television of tfr** first two impas- 
Biffen, the leader of the House of sioned speechs of -Mr Neil Rmrwvk 

Commons, looked embarrassed. 
Mrs Thatcher then developed 

tire Labour leader. 

Both Mr Kinnock and. Dr David 

several of her major campaign -Owen, tire SDP leader, attacked the 
themes. In particular, she argued Conservative election broadcast on 
that the phrase “power to the peop- Tuesday night which featured the 
Ie is more than just a slogan and Union Jack and films of both world 
means people taking important de- wars. 

ririnns tbefflg dVBS in «vhu»afi nw arvt 


Wider ownership meant that "the 

The Labour leader, commented 
that “when you see MrsThatchei*s 
kind of Tories wrapping themselves 

privilege of the few would become in the flag, it does make you very 
the daily experience of the lives of suspicious when they have done so 

the many." 

Reflecting the concern of Tory under it" 

much damage to people who live 

strategists about the party’s image 
on social issues she said it was 

Similarly, Dr Owen said that To- 
ry pfainw to have "a monopoly of 

“false and wicked” to suggest that patriotism” stuck in "a hell of a lot 
people did not care for the side and of peoples’ gullets." He and Mrs 
ilL She stressed the Governments. Thatcher also engaged in a vigorous 
record on the h e al t h sendee, in bufi- exchange over Alliance defence pol- 
rimg hospitals and reducing waiting icy and its similarity, or lads of it, 
lists. with Labour's approach. 

A rolling Harris Research survey Mr David Steel, tire liberal lead- 
far TV-am, of which a quarter is up- er, last night launched a strong at- 
dated each day, puts Labour an 34 tads an the Government for a lack 
per cent, up three percentage paints of feeling and accused Mrs Thatch- 
since the weekend, with the Tories er of hypocrisy for using the slogan 
on 41 per cent and tire Alliance on "power to the people." 

24 per cent 

He said there was no suggestion I 

Conservative strategists appear of allowing people political power or 
relaxed about recent polls. Mr Nor- any recognition by her of the “pas- 

man Tehbit; the Conservative Party sionatebelief in balance of power"] government p r e p ar ed 
chairman, told party candidates which was intrinsic to liberal andi. teachers' rights to 
yesterday that “we have a good Social Democratic values. 1 wages and conditions: 

By Jhnray Bums 

TRADERS OF the two main 
te aching onions in England and 
Vales yesterday agreed to inten- 
sify their selective strike action 
in the last week of the general 
ejection campaign, but said there 
would be an Indefinite trace 
starting on tire day before poffing 

Hie strike action fe in protest 
at a pay award imposed by the 
Go v er nm ent and the withdrawal 
of the teachers* negotiating ma- 

The two-stage strategy, aimed 
at bringing education to the fore- 
front of the election campaign 
while leaving the door open for a 
settlement with the future gov- 
ernment, was adopted unani- 
mously by officers of the Nation- 
al Union of Teachers (NUT) and 
die National Association of 
Schowhnasters/Pnion of Women 
Teachers at a joint meeting in 


The intensified action wffl he-, 
gin on June 1 and wiD ahwnst 
double the number of ednea- 

day strikes this month! The two 
unions, which represent almost 
two- thirds of the ^U^OO-strong 
teaching force, expect to involve 

Yesterday's move, which coin- 
cided with the renewed threat of 
a dvfl servants strike on June 8 
and 9, drew an angry respon se 
from Mr w— Baker, die Ed- 
ucation Secretary, but was inter- 
preted at a mixed Messing by the 

"For the mdmm to bring child- 
ren into ftfa election 
by disrupting their education is 
tmfbrgivabie,’* Mr Baker said. 
Many teachers resulted "this at- 
tempt by union leaders to drag 
them into poHUwii confro ntati on 
with die g ov ernmen t** 

Mr Giles Radices labour’s edu- 
cation spokesman, - who ha* 
urged teachers to call off their 
action during die ca maaif u, de- 
scribed the intensification as *fo- 
gRttaUe”. He said the dispute 
would be re s o lve d overnight by a 
government prepared to restore 
teachers* rights to nego t ia te 



home loans were rationed. to other institutions or escape the structure, which had been expected 

Senior figure in the irufestry toe K^ricticm by becoming banks. to be controversial, were approved 
also convinced that last year's “What we don’t want to see and by its »nm,*i general meeting with- 
Building Societies Act, which aimed what I am sure the Government out objection! These redistribute 
to put societies on a par. with other doesnt want to see is a return to fnm ^ email socie- 

fmancial institutions, did not go far mortgage queues," he said. Those at ties abolish three of the associa- 
enough. They believe that financial the bottom of the bousing ladder tion - s ^ regions and change it 
markets are moving so quickly that would be most affected, he argued, from being a policy mitring body in- 
another Act will be needed within as building societies’ competitors in to a lobbying organisation, while at 
five years. the mortgage market were only in- fl* time giving more indepen- 

These and other concerns were terested in “crea m i n g off* the best dence to its pennanent staff, 
revealed at the Building Societies business. 

Association’s a^y ai conference in The association is expected to ask . Some of the smaller socretoesbad 

Harrogate yesterday, which also the Government to increase the 

implemented wide-ranging funding limit to 25 per cent in the ^ 1 stains. On the other hand, 

in the constitution of the associa- early autumn. Some societies, bow- Abbey had threatened to leave 
tion to give more power to the larg- ever, argue that this new limit * 0 ® assoaation if the c ha n ges were 
er societies. would soon be exceeded so they not P 8556 **- 

Under Last year's Act, no more should push for the full 40 per cent Societies’ performance in the re- 

thnn 20 per cent of a society’s f unds Mr Cox aim s»iH that finaneial tail savings market improved last 

can be from wholesale markets- al- markets were chang in g so rapidly month, partly as a result of the poor 
th p n g h the Government can in- that a new Act would be needed showing by National Savings, ac- 
erease this Emit to 40 per <v»nt. by within five years that the Gov- cording to figures also released yes- 
secondary legislation. Heightened eminent had virtually accepted the terday by the association. However, 
competition in the retail savings idea. This view was backed up by societies’ receipts for May are ex- 
market, in particular from unit both Mr John Spalding and Mr Pe- pected to be badly hit by the pnvati- 
trusts and the Governments priva* ter Birch, respectively chief execu- safion of Rolls-Royce, which resiilt- 
tisstion ig n ite s , hre mad** it difficult lives of the Halifax and Abbey Na- ed in a heavy switch of investor 
for societies to satisfy mortgage de- tinnal, funds. 

Money supply reflects Economic 
buoyant borrowing output up 

to be controversial, were approved 
by its annual general meeting with- 
out objections. These redistribute 


THE LATEST set of British money 

Aprils figures showed bank lesd- 

supply figures for April show wor- ing riae by £L5bn compared with 
tying signs of buoyancy in personal the £2.08bn rise seen in March. The 
sector borrowing and consumption, very high level of bank lending in 
reflecting healthy demand for cred- recent months has been one of the 
it for house purchase and the re- key factors boosting broad money 
bound in retail sales volumes in the growth and has been a focus for 
month- concerns about the inflationary con- 

sequences of the current credit 
Personal sector demand is likely hnnm 
to be boosted farther by the tax cuts 

announced in the budget, coupled Although April's growth was sub- 
with the two-point fall in borrowing stantially lower than the average 
costs sinnp March and recent cuts over the last six months, tending 
in mortgage rates. was dominated by the personal sec- 

™ „ tor and could feed directiv into con- 

The Bank of Engl a nd is con- sumption, raising fearaof higher in- 
cemed about the inflationary impli- flatten. 

cations of surging asset prices, par- 
ticularly in tire housing sector, and 

The broad money measure M3, 

- ' «■:/> 

moves into 
new sector 

By Eric Short 

come the first major life assurance 
company operating in the UK to ex- 
pand its financial services opera- 
tions Iqr becoming a leading player 
injhe banking ami deposit fi eld. 

The Canadian-based Manufactur- 
ers Life Insurance Group has 
acquired for its operations the Ply- 
mouth-based Western Trust & Sav- 
ings from the Royal Omit of Cana- 

The amount of the consideration 
is not disclosed, but it is believed to 
be about C18m - the net assets of 
Western Trust as at September 30, 
1888. The Royal Bank of Canada 
said last year that it was selling 
Western Trust and concentrating 
on investment and corporate bank- 
ing in the UK. 

Life companies in tire UK have 
been expanding their operations in 
recent years beyond their tradi- 
tional life and pensions sectors into 
other areas of financial services, 
particularly unit trusts. 

But one major gap in their ser- 
vices has been a lack of deposit-tak- 
ing facilities. The Prudential Cor- 
poration, Britain’s largest life 
group, has indicated that it will ulti- 
mately acquire a deposit taker to 
complete its range of savings prod- 
ucts and services. 

However, Mr Joe Mounsey, Man- 
ulife’s vice-president and -general 
manager for the UK, said that sec- 
uring a major deposit-taking facili- 
ty was only one of a number of ad-, 
vantages brought by the acquisi- 

Western Trusts main area of ex- 
pansion in recent years has been in 
the mortgage tending fiekL Its pres- 
ent tending is running at £om a 
week, and its total mortgage book 
now exceeds £400m. 

However, Mr Joe Mounsey. Man- 
ulife's vice president and general 
manag er for the UK, said that sec- 
tiring a major deposit-taking facili- 
ty was only one of a numbw of ad- 
vantages brought by the acquisi- 

Western Trust's main area of ex- 
pansion in recent years has been in 
the mortgage lending field. Its pres- 
ent lending is running at Cflnx a 
week, and its total mortgage book 
now exceeds £400m. 

Life companies, such os Manu- 
life, which sen through their own 
field force, get very little mortgage- 
related business from b u i ldin g so- 
cieties. They have to provide their 
own mortgage tending fhdtxties in 
order to participate in the lucrative 
low cost endowment market 
The acquisition of Western Trust 
gives. Maaolife that facility. 

In addition, Manulife will now be 
able to offer a range of ban ser- 
vices to its client base. 

Courier moyed £5.2m 
Guinness payment 


THE £52m payment made by Gun- Over the next tiro months the 
ness to its former director 8b Tho- €3m, together with most of the 
ihm Ward was transferred in DJm remaining from the o ri g in a l 
tranches by a specially appo in ted payment, was transferred several 
courier between several Swiss and times between different banks and 
Austrian hanln? during November bank accounts in Switzerland and 
auri December, it ii« emerged. Vienna. 

One of the transactions, tire pay- - wearlv all the y transfers were 

strong corretTTTwr spending, backed formerly sterling M3, rose by be- 
by demand for and avaflahUity of tween 1^4 per oent and 2 per cent in 
credit April, taking its year-on-year 

growth rate to around 20ft per cent 

Growth in tire narrow a gg re gate 
of money supply. Mo, consisting 

Despite the small rise in bank 

mostly of notes and corns lending to id a re latively low Public 

tion, rose by about tt point last Secto Borrowing Requirement in 
month, according to yesterday's hroad money was boosted by 
provisional figures released by the “e Bank of England’s intervention 
Rank q£ Twiim/i to cap sterling's rise on foreign ex- 

changes which has injected sub- 
This took its year-on-year growth stantial extra liquidity into the 
rate to 5% per cent a sharp jump banking system, 
from tire per cent animal rate in _ - . 

Mareh. After the authorities finally , Bank can ste rili se interven* 
decided to drop its target range for by selling more government 
broad z&onfiy, riprfing M3, now rc- -dabt, but this did not happen in 
named simply M3, Mo is the only April. The Bank has warned recent- 

une 01 tne transactions, me pay - Neariy ^ transfers were aggregate formally targeted by the -w mervenm 
meat of approximately £3m of the made not by tire conventional elec- Government lised m this way o 

original sum into a Swiss bank ac- tonic but through a special- that +>,* an- y®" but not 

count belonging to Mr Ernest Saunr ^ appointed courierwto physically if Sfll h5n2s “£ £“* mea 

ders, tire deposed chief executive of &gSes ftaTone bJmktom*- “f^tobeten 

Guinness, appears not to have been cent mi a seasonally adjusted basi^ M3 money supply, 

planned as acovertway of allowing - Nevertheless, the acceleration of 

Mr Saunders to benefit ftom part of By that stage about SLlm the growth rate into the upper half Yesterday's figo 

aggregate formally targeted by the & that intervention will be neutra- 
Govemzae nt Used in this way over the course of 

x the year but not on a month-by- 

Ba nk offic ials noted that the an- month basis, meaning that there 
nual growth rate is still below S per are likely to be temporary bulges in 

tiie growth rate into the upper half Yesterday's figures show there 
the payment as one Guinness di- (£650J)00) of the - £53m bad been ofits2per cent toBper cent target were net redemptions of £300m in 
rectorsuggested in a court case in spent by Mr Ward to repay a bank range, jrertly due to the rebound in [**** external counterpart 
April. iftnrt; tn partid ^ate * c ommercial retail sales in April, offers a less fa- to M3, in cludin g the bufld-up of for- 

RbRaw Mr Ward for tire real estate development; to make a vourable enviro nment for further eign cmro^ reserves, was expan- 
nse of Mr Saunders’ account with S100.000 loan to Mr Ken Lazarus, a base rate cuts. sionaiy by ELibn. 

Union of Switzerland because partner of Mr Ward in his Washing- 

of his rqgiarent wmcern to sbteid ton DC law firm; to pay transa c tio n __ 

SffaSS and^legal fees and possibly to buy a p QWer COUltt &&& 

tbe fe^Re^Bervic^ EventoaDy. shortly before Mr 

Mr David Aufhauser, Mr Ward’s Jersey company was com- 

personal lawyer, canceoed yestCT- m Much to disdose as a re- 

day that, in arranging tire qonyoln^ ^It of a court action what it had 
«1 senes of paymate^ifrWarf with tire payment, Mr Ward 

‘largest private monopoly’ 


bad bera. ronoemed about “the ap- abandoned his plan to tet tire sum poTVATTCron tiv» r wi r i. :i„ * 

tJc t tar in Ec rope, 

GutafflK has alleged that the 

£5&n payment made to a Jersey a bank account in New Ywk 

company owned bY Mr Ward last andS4.7HiwasusedtopayaUSfedr 

May, ostensibly for bis services don- —aland state tax bifl. 151 

ing Guinness^ £25bn takeover bat- 
tle for Distillers, was a breach of his In a court hea ri ng in London on j.ub sway, oy nor /uorew 

fiduciary duty, in July £3m of the Tuesday, the Vice-Chancellor, Sir Holmes, Editor of the Financial 
money was transferred td Mr Saua- Nicholas Browne-Wflkinson, said Tlr^nev^tte^'Tower Europe”, 
decs' account and then withdrawn he had made no final judgment XI " * '*■ 
in four rfiffortmt currencies on No- about the validity of the SS2m pay- 

vember 14and December L mentto Mr Ward in fact or in tew. 

competing companies. 

More buy-out companies go public 

A GROWING number of the compar 
nies which have been bought out by 
their managements in recent years 
hare moved on to the stock market 
to finance foe next stage of growth. 

A total of companies have 
moved to a Ml listi ng, th e Unlisted 

Securities Market (USM) or the 
overfofrc oon fier (OTQ msriut 86" 


rtmn £2L4bn. Has compares witii a just under 39 years - ra nging from 

valoation of £820m put on them at STOCK EXCHANGE LISTINGS two to 164 years. 

the tfmo of hov-out and a value of OF M A N AG EME NT BUY-OUTS Thp dwiv Imkc at tho norf/m. 

th«» timi> of buy-out and a value of OF M 
£L5bn when they first obtained a • 
i parket fi st in g . 

The USM was the most popular ■ 

market fire buyout co mp anies ao- J”® 
counting for 80 per emit of those 
wiuch wgpt public: It was followed t B 83 

cording to a survey published yes- by the Stock Exchm^proper with 198 4 
ter^y by Nottingham Univeraty’s 30 per cent and foe OTC with 10 per IMS 

MyMffpnreni BuyOut 

Research. Buyouts have come to account u**B*im£ ---- 

Tie buyout was row a finnlyes- for a significant share of company 

tablished part of foe corporate fi- going to market. ^Tiey accounted — ~ M 31 102 

SSasww sa«t«as 


TO© 102 companies covered by moves from the buyout stage to a ^ 

foe report (a further eight have listing is incre a s i n g. More than half 
since come to market) have com- of flotations occurred within three P 01 * sa ^~ 

SSStG^Sttenofmore* years cd the buyout panres covered by foe survey was 

The stody looks at the perfor- 

- — mance of buy-outs in the two years 

OTC OWE Fog Total before and the two years after Cota- 
"2 ^ Z T tiorl 80,1 concludes in terms of 

7 2 a 5 share price and price/eamings ra- 

1 4 1 6 ttes they do particularly weH 

2 6 B 14 Buyouts which wait for a full 

- 21 S 27 fo 1984 increased their mar- 

1 22 13 as ket capitalisation by 112.6 per cent 

- 2 1 3 by February 1987 compared with a 

95.5 per cent rise in the FT 500 fn- 

dex. USM-quoted buyouts also out- 

B M 31 102 performed the Datastream USM In- 

■ dex, the study showed. 

'Flotations of Management Bvy- 

reftects tire fact that 0“**- W*** Wright, Ken Robbie and 

i are wdtestaMished Joh ? PW 1 *- Published by Spicer 

suaily operating in <2! ^ aocia - 

with The Centre for Manage- 

ts with relatively low ment Buy-Out Research. University 
quirements, the re- of Nottingham. Price C85. 

average age of com- _ 

i hv the survev was Newtown tary-oots, Page 8 

| by 3.6% 

By Ph91p Stephens 

BRITAIN’S economic o utput rose 
by 0.4 per cent in the first three 
months of this year to put it 3A per 
cent above a year earlier, according 
to official figures released yester- 

The rise in the latest three 
months reflected a steep increase in 
energy output - mainly North Sea 
oil production - which offset a flat 
performance by the manufacturing 
sector and a sharp fall in construct- 
ion activity. The output of service 
industries is thought to have risen 

The figures, released by the Cen- 
tral Statistical Office, suggest some 
slowing in the pace of economic 
growth after the rapid acceleration 
in the miHrilp of last year. Manufac- 
turing output, in partioilar, has dis- 
appointed more optimistic expecta- 

Part of the explanation, however, 
may have been the severe weather 
in January, which is thought to 
have depressed both manufacturing 
and construction activity. 

Most City of London economists 
expect the economy to expand by 3 
per cent or slightly more in 1987, in 
line with the Treasury's forecast in 
the March budget, with the main 
risk to growth coming from a dete- 
riorating international environ- 

Sterling’s recent rise on the for- 
eign exchange markets, however, 
has prompted forecasters to revise 
down their expectations for 1988, 
with many now predicting a growth 
rate in that year of only 2 per cent 

The CSO said that based on preli- 
minary data its index of foe output 
measure of gross domestic product 
stood at 115.7 (1980-100) in the 
first quarter compared to 1152 in 
the last three months of 1986. 



ECONOMIC ACTIVITY— Indices of industrial production, manu- 
facturing output (1980-100); engineering orders (1980-= 100); retail 
sales volume < 1980 * 100 ); retail sales value ( 1880 — 100 ); registered 
unemployment (excluding school leavers) and unfilled vacancies 
(000s). All seasonally adjusted. 








4th qtr. 
















1 st qtr. 








2nd qtr. 








3rd qtr. 








4th qtr. 
































1st qtr. 

































OUTPUT— By market sector, consumer goods, investment goods, 
intermediate goods (materials and fuels); engineering output, 
metal manufacture, textiles, leather and clothing (1980=100): hous- 

Ing starts (000s, monthly average). 

Cnsraer. Invest. lntmd. 






4th qtr. 


1st qtr. 






















2nd qtr. 








3rd qtr. 








4th qtr. 









































1st qtr. 
































EXTERNAL TRADE— Indices of export and import volume 
(1980=100); viable balance; current balance (£m); oil balance (£m); 
terms of trade (1980=100); official reserves. 
















1st qtr. 








2nd qtr. 




- 94 




3rd qtr. 








4th qtr. 









































1st qtr. 












+ 73 






















FINANCIAL— Money supply M0, Ml and sterling M3 (three mouths’ 
growth at annual rate), bank sterling lending to private sector; 
building societies' net inflow; HPf, new credit; all 
seasonally adjusted. Clearing Bank base rate (end period). 

Bank BS UP Base 
















4th qtr. 




+5878 2899 




1 st qtr. 








2nd qtr. 








3rd qtr. 








4th q'tr. 




















+2,488 1851 


















it. oe 


1st qtr. 



































INFLATION— Indices of earnings (Jan 1980=100); basic materials 
and file Is, wholesale prices of manufactured products (1980=100); 
retail prices and food prices (Jan 1987=100); Reuters commodity 
index (Sept 1931=100); trade weighted value of sterling (1975-100). 


1st qtr. 



















2nd qtr. 





. 98.7 



3rd qtr. 








4th qtr. 









































1st qtr 







































• Not seasonally adjusted. 

t From January 1906 Includes amounts outstanding on credit cards. 


DimexHotrse.tfGHrgh Street, 
Soil hull, Hfest Midlands 
B'fl ASD, lefO^ ■ 70-i ■ 3S&1 
Tefex: 336652. 

rosvenor Development 
Capitol Limited 

PRIVATISING tire electricity in- says that c om pet i tion could be 
dusfxy could raise as mneh as £l8bu kiHpd off if the industry were priva- 
says a study published yesterday, t* 5 ®* a whole, 
but it gives a warning that a f utur e The result, they say, would be a 
Conservative government would private mo nopoly larger than any 
need to split tire industry tip into other in the world, controllin g both 
competing companies. the production and distribution of a 

The study, by Mr Andrew vital source of energy. 

Tuesday, the Vice-Chancellor, Sir Holmes, Editor of tire Financial . Unlike gas, electricity was used 
Nicholas Browne-Wflkinson, said Times newsletter “Power Europe”, ® many applications such as «>m- 
he had wmA> no final judgment with Mr John Cheshire and Mr P* 1 *® 1 * “d street lighting, where, 
about the validity of the £5.2m pay- Steve Thomas of the Science Policy there was no competition from oth- , 
mentto Mr Ward in fact or in law. Research Unit, Sussex University, eriueis. 





Profit on sale of investments 

(less Provisions) 



Investment Income 



Operating Expenses 



Operating profit 



Interest on 18% Loan Stock 



Profit before Tax 






Extracts from the Chairman's statement: 

"1986 was a record year. The pre-tax profit of £1.06 million was a record. It was 
struck after interest payments to stockholders of £1 . 15 million. During the year 
two investments were floated on the USM and another investment moved from 
the USM. to the main Stock Exchange market. 


The 33 investments in the portfolio axe valued at £13.6 million against a book 
value of £7.9 million. Total payments to stockholders since the funds's ' 
inception have amounted to £3.2m. Investors who subscribed in February 1982 
have seen a return of 35% p.a. over the period. The Board believe that fora 
fund of only £9. 1 million which has already made substantial returns of cash 
to its investors, this is an exceptionally good performance". 

John D Oakley CBE. DFC 

Copies of the accounts are available from 

Grosvenor Venture Managers limited, 
Commerce House, 2-6 Bath Road, Sough, Berkshire SL1 3RZ. 


Financial Hanes Thursday May 21 1087 




to KarparatadJn Engl a nd under the Companiee Acts 1908 to 1917 Registered No. 169517) 



N M Rothschild & Sons Limited 

5,639,000 ordinary shares of lOp each at 77p per share 

operates in three distinct areas: the "design and build" 
an ” tedustoial steel-framed buildings: steel services including 
processing and distribution erf steel; and the development, manufacture 

ana markenXKT Of Rrwv-inTiet “T 




Share Capital 

in ordinary shares erf 1 Op each 

Issued and allotted 

betng placed rank pari passu in all impacts with tbe » 
b* WOHod to participate to hill lor all dividends and other amnc 
CBCtar<K L OT mode on the ordinary share capital of Henry Barrett Group PIC. 

•T ip— • y?T** w .T* 1M “» txitmma negwanoxEi or me uouneu or tbs smock exert ange N M Rothschild 
instructed Parsnura Gordon & Co. Undtod and Henry Cooke. Lumsden Limited 
to place 4^29,250 and 1.409,750 ordinary shares respectively. 

relating to Henry Barrett Group PIC are avaOdble in the s ta tistical service of Extol 
Services Limited. Copies oi the listing Particulars may be obtained daring normal business 
ttoui x fSat ui <k.j. a and public holidays excepted) up to and mauding Z3th May, 1987. tor collection 
SHjJKS 1 , Company AnnouncetnenfK Office, Tins Stock Exchange. Throgmorton Street London 
ECZP2JX and up to and including 3rd June. 1987 from: 

Henry Barrett Group PLC 
Barrett House, 

Cutler Heights Lane, 
Dudley Hill, 

B94 9HU 

21st May, 1987 

Panmure Gordon & Co. 

9 Moorfields Highwaflc. 

IfM Rothschild & Sons 


New Court, 
St Swithin's Lane. 




IBM extends international 
access to data services 


IBM, the world’s largest computer 
company, is extending its value- 
added data services by allowing UK 
customers greater international 
access to these services. 

Value-added services involve die 
tr ansmission of data and other in- 
formation over the telecommunica- 
tions networks. 

The Government recently re- 
moved these services, demand for 
which has been growing, from al- 
most all regulatory restrictions. 

IBM launched its value-added 
network in the UK at the start of 
last year, but so far its UK custom- 
ers have had only limited access to 
IBM’s value-added networks inter 1 
nationally, which cover the US. Ja- 
pan, 13 European countries and Is* 

It is now extending that interna- 
tional so its value-added 

customers will be able to exchange 
information, send electronical- 
ly and transfer files more easily in- 
ternationall y 

In particular, it is extending the 
international coverage erf its trade 
data interchange service, which al- 
lows the transmission of business 
documents relating to transactions 
ym»>i as buying and ^pffi n g 

IBM believes this will allow it to 
move more strongly into the retail 
value-added market in the UK, 
where ICL, the largest UK-owned 
computer company, is at present 

IBM’s value-added markets 
in the UK are in the ffawnrw nwrf in- 
surance sectors, although it is in- 

volved to a pOot study in. the freight 
and shipping industry. 

To provide for this greater inter- 
national emphasis, IBM is upgrad- 
ing its Warwick comp ute r centre in 
the west Midlands into its second 
European control centre to 1 value- 
added networks, foe first befog in 
the Netherlands. 

This will create an extra 100 jobs 
over two years. The Warwick centre 
employs about 200 people now. 

IBM also announced it was tak- 
ing steps to ensure that its private 
value-added network can intercon- 
nect with the public date network. 
This is a move by IBM tow a rds 
open standards, which the recent 
liberalisation of value-added ser- 
vices was intended to promote. 

Renault system links 
dealers directly to 
French factories 


group’s factories in France instead 
^through foe UK import rompany- 
Tfcesjrctem cuts ' Kb *de ***** 

‘Tide turns 9 for British industry 


GREATER optimism being voiced 
by British industry was foe “turn of 
foe tide", according to Mr David 
Hickson, president of foe Confeder- 
ation of British Industry. 

Mr Nickson said yesterday that, 
everything the confederation had 
worked for over foe past 10 years 
was beginning to come together. In- 
dustry was starting to succeed in a 
better environment than it had 
known for a long time. 

The CBI would not openly en- 
dorse foe Conservative Party in foe 
election campaign Mr Nickson 
said: “Any government which is 

formed after the election wfll have 
to understand the central import- 
ance of business if it is to meet the 
expectations of foe British people 
in terms of jobs and living stan- 
dards into the 1990s.” 

The president will be visiting 
business leaders in Japan shortly to 
continue a campaign designed to 
Impress upon Japan foe importance 
that it make concessions to enable 
greater access to its markets. 

Sectors identified at the monthly 
CBI council meeting yesterday as 
ripe for greater liberalisation in- 
cluded cars, Scotch whisky and 

leather goods. A footwear manufac- 
turer said current quotas permitted 
only one pair of imported dues per 

head of population every 60 years. 

“We are not going to have a slang- 
ing match with (he Japanese”, said 
Mr Nickson.” But it is only by foe 
constant reiteration erf the argu- 
ments that foe message will get 

# CBI income in 1986 totalled 
EllJm (1985 £10.3m) and expendi- 
ture ElOiHhn (a0.4m) leaving a sur- 
plus of nearly £25,000 against a def- 
icit of £64^15 in 1985. 

RENAULT'S car and van subsid- 
iary in the UK is being used to test 
a new distribution system which 
links dealers directly wifo 'the facto- 
ries and is designed to cut vehicle 
stories by half within foe state- 
owned French group’s export opera- 

33% new system should make Re- 
nault UK, which has already recov- _ 

WM^nto a togMy profitable urgam- ^ ordered up to two weeks 
sabon, sard Mr lac Caperan, man- th- car is assembled, 

agmg director of foe British compa- The UK is the first of Renault's 

**1 .. ' . export markets to employ the new 

Tumble profit for last year system, which later this year will 
jumped from £L8m in 1985 to about a i CT be introduced in West Ger- 
£4An or about 1 per cent of torn- mom, and Belgium. Next year 
over, helped by a careful reorgani- Soain will be added to foe list 

— U TTnm. Tnthe case of the UK, Renault 

from four months supply to two 
months and one week, thus giving 
big savings in financing charges. 

At the sf * ! "** time dealers are able 
more accurately to reflect customer 
preferences by ordering only five 
weeks in advance of production. 
Dealers can also make changes to 

ration of Renault UK's debt to cot 
interest payments. 

The new distribution arrange- 
ments would speed foe recovery 
and enable Renault UK to spend 
more on promotion, muj 

sales while remaining reasonably 
profitable, Mr Caperan said. 

The new distribution system en- 
ables Renanbfs 385 dealers in Brit- 
ain to toe IBM desk-top co m p u t e r s 
to order vehicles directly froze foe 

has also reorganised its physical 
distribution system so that vehicles 
are shipped only through one Euro- 
pean port, Le Havre, to Southamp- 
ton, an the south coast of England, 
»nri Goole, in the north-east. 

There can be two shipments each 
week to both UK ports and foe time 
between a car being made and ar- 
riving at the British dealer’s outlet 
has been cut to two weeks. 

New town managers 
propose buy-outs 


The com Fort rating of an airliner isn’t merely a function of how 
kind the seats are to your body. 

Equally important to your comfort, is how uncrowded your 
mind feels. 

It's hard to devote proper attention to a business report when 
you’re jostling with the person beside you for control of the armrest. 

This is why, on TWA Ambassador Class, 
we do so much to separate you both. 

TWA was bom in the wide, uncrowded 
American West. And it shows. 

The TWA Business Lounger is the widest 
seat across the Atlantic. 

With an extra-wide armrest to ensure your 
personal space. Nor have we neglected the other 
dimensions of comfort. 

Our upholstery has been designed with your 

•kV« •** • 0 - £St§ 

: : r/rAHS WORLD- ■ ■ 

All round a better business experience. 

M * O j 

favourite armchair in mind. You’ll find ample legroom between you 
and the seat in front. 

You’ll be welcomed aboard with champagne. 

Jf you fly with us frequently, you’ll notice how regularly we vary 
onr menu, to keep your palate pleasantly surprised. 

Your meals are attractively presented with china, glass 
and linen. 

Another tremendously comforting aspect is TWA’s exclusive 
Airport Express Service. This lets you reserve your seat (Smoking, 
Non Smoking, Aisle, Window) and obtain your boarding cards, 
long before your.flight date. 

And you can do this for all your 
TWA flights to the US, in the US, 
and home from the US. 

In tandem with our priority 
Ambassador Class Luggage Check- 
In, this lets you skate round 
aiiport queues. 

And TWA operates this 
service to nearly 100 cities all 
over the States. 

: . . 

To experience the all-round comfort of 
Ambassador Class, contact your Travel Agent or 
TWA free on 0800 22 22 22. 

You’ll find the experience positively 


PROPOSALS FOR the first man- already been transferred to the lo- 
agement buy-out of new town as- cal authorities and the town centres 
sets have been drawn up by the sold. 

managers erf Newton Aydiffe and Approval for this particular sale 
Fetertee, the new towns in county was given nearly two weeks ago by 
Durham, north east England. Mr John Patten, Minister for Hous- 
They plan to put in a bid for all fog, Urban Affairs and Gonstruc- 
the outstanding assets (rf tire towns tfon. His announcement signalled 
alien they go on sale shortly. foe end <rf the battle by foe three 
The management team has a b nrtrtfi eastern new towns - Newton 
ready found financial institutions Aydiffe, Feteriee and Washington - 
sufficiently interested in industrial to the life of the new town 

property in foe north east of Eng- corporations until 1990. 
land to give tbe bid their backing. The bids will be assessed by the 
Mr Ed Henderson, chief execu- board of foe corporation, almost 
five of Aydiffe and Etefeerlee Devel- certainly in consultation with the 
opment Corporation which runs Department of foe Environment, 
both new towns, expects to com- Concern has been ex p ressed recent- 
pfete the financial package shortly. |y by the National Audit Office and 
ft will be made up of equity and foe Puhlte Accounts Committee that 
loans, highly geared. Advisers to new town assets hove sometimes 
foe five strong management team been sold of! too quickly and too 
are Richard SHk, the firm of sur- cheaply. 

veyors, and Touche Ross, the ac- Fears in foe North East have cen- 
countantsL tred on the job-creating activities of 

Industrial assets totalling 3.7m sq tbe corporations being run down 
ft will be going an offer. Rents are nnrfpr new owners. The manage- 
low at about £1.50 a square foot, on mwit teams, by contrast, would 
five-year rent reviews. In aU, the pledge to cany on this role, 
towns have around 9m sq ft <rf facto- Some years ago there was an at- 
ry space, the majority of which has tempt by foe management of Red- 
been sold after foe Govenuoetfs ditch, in foe West to buy 

decision to wind-up all the new all the assets of the town, but this 
town development corporations and vras not advanced as it was thought 
sell their assets to foe private sec- that the result would be too much of 
tor. Housing in the two towns has. a “company town.” 

British Telecom sells 
hundreds of properties 


BRETISH TELECOM is selling hun- 
dreds of properties which it no long- 
er needs because .of its exchange 
mode rn i s ati on programme. 

During the past year, BT has 
speeded op tbe introduction of digi- 
tal telephone exchanges, which it is 
now bringing into service at tbe 
rate (rf one per working day on av- 
erage. Digital exchanges are much 
j fmailgr foan fop older jpn w fltion of 
analogue exchanges. 

BT has therefore been able to 
concentrate foe siting of its modem 
exchanges, releasing a large num- 
ber of surplus buildings. 

BT is afro now able to sell other 
properties situated next to its ex- 

change iwiiHinpi , which it bought 
in the 1960s and 1970s before the in- 
troduction of digital exchanges. 

It acquired these properties, 
which indude shops, houses and va- 
cant land, because it believed its ex- 
change buildings would eventually 
have to be extended. 

BT has sold more than 500 prop- 
erties in the past 18 months as a re- 
sult of its exchange modernisation 
programme. It would not put a val- 
ue on these sates, other than to say 
that they ran into the millions of 

Thi s disposal programme will 
grow in volume and will continue 
into the 1990s, the company 

Laing wins Sizewell contract 


A CONTRACT valued at ElOQm to 
build tiie main czvfl engineering 
works at the Sizewell B nuclear 
power station on the east coast of 
England has been awarded to John 
Laing Construction (JLC). 

The civil engineering work repre- 
sents the biggest individual con- 
tract in the EL55bn Sizewell project 
and the first to be awarded since 
the Government anmwmyi its fop. 
mal approval. This was given after 
Britain's longest public inquiry 

whi ch las ted 27 months. 

Before the Government an- 
nouncement, the CBGB had already 
let a series of contracts, worth 
about £140m, for the pressure ves- 
sel, steam generation and pipe- 

For Laing, which won tbe con- 
tract against strong competition 
with Wimpey/Cementation. it is a 
valuable acquisition at a time of 
slack orders in the civil engineering 


caj* j! 



Financial Times Thursday Slay 21 1987 




u The day you start to think about how 

1 people work in an office is the day you begin 
to achieve the impossible. 

- -- - •» 
’■< ! . ‘ 

1. How do people acquire 


Ibday there is no limit to theujuantity of 
information that technology can bring to 
people’s desks. But the quality of their 
response leads many executives to doubt the 
return on their investment in information 
technology - despite their faith in the strategic 
value of the information itself. 

That’s because it only has strategic value 
when it results in better understanding, 
better insight, and better c ommunic ation of 
that insight 

2. How do Deoole aain 

your thoughts productively we have 
developed an integrated workstation concept 
that will benefitfrom knowledge-gaining tools 
and artificial intelligence. 

3. How best do people 

To help youhandleinformationand collect 

We at Rank Xerox have spent the past 
20 years asking such questions, analysing the 
way people work, think, and communicate. This 
has helped us to develop our office systems 
architecture embradngboth data and document 
management to support the way people work. 
Complemented by our strengths in electronic 
printing, facsimile^canning and reprographics, 
the result is the creation and management 
of high quality compound documents. 

An office system based / 
on how people work. / 

No one understands better than / 

we do the importance of the strategic decision 
to invest in an office system. 

So that you can appreciate how Rank 
Xerox will help you develop your strategy, a 
team of executive consultants is ready to 
present our ideas to you. Naturally, without 

Simply call 0800 010766 to start the 





In banking, the single most important 
test of strength is capital. But it’s not the only 
one. At Chemical, we recently increased our 
capital by nearly one billion dollars, and our 
capital to assets ratio puts us ahead of most of 
our competitors. 

But we set performance standards for 
ourselves that measure more than capital levels 
or ratios and emphasize the skill with which we 
deploy our capital for our clients. 

We've invested our capital to expand into 
investment banking, using it to support an 
average securities trading volume of $40 billion 
a day. We’ve broken new ground in interstate 
banking— committing capital to the largest 

interstate merger in bankinghistory, with Texas 
Commerce Bancshares, and to the largest 
merger between a New "fork and a New Jersey 
bank, with Horizon Bancorp. 

In the end, no amount of capital will 
protect a bank against poor management, while 
there’s no limit to what hard work, sound 
management and imagination can accomplish 
with the capital we have. 

That’s why we’re proud of our bank’s 
capital strength and even prouder of our 
personal strengths: financial skill and judgment. 


The bottom line is excellence. 


i c 



MwtbwFDlc (&19Q7Cbmic«(Qanit f \ 


Financial Times Thursday May 21 1987 



ASD A man to join Ocean 

TRADING baa appointed Mr In 
Laurie as finance director, from 
August 1, in succession to Hr 
Ronald taom win will be 

American Bank, where he was 
previously head of the merchant 
hanking group, after spending 
three years as executive director 
of First Qii«irn and vice presi- 

re tiring due to to health.' Hr dent of First National Bank of 
Laurie has been finance' director Chicago. 

of ASDA Stores since 1984 and 
was appointed to the executive 
board of ASUA-MFI in 1985. 
Prior to that, be gained flnmnHal 
experience with two other major 
retail groups, Home Charm and 
Saracen tre. 

ASDA has appointed two hoard 
directors from August 1. lb 
Ren Scott becomes finance 

Hr DnU Stratus has bee n 
jointed chairman of SEDG- 
a member of the Sedgwick 
Group. He also joins the board 
of the Sedgwick UK Group. Mr 
Strauss was managing director of 
Sedgwick Benefit Consultants in 
Melbourne, Australia, until he 

of the Hilton Keynes company, 
is now a main board director of 
Llewellyln Construction. Hr 
David HanWn. who recently 
Joined Walter Llewellyn and 
Sons as chief e xe c utiv e, London 
office, becomes an executive 
director. Mr Keith Bedford, 
who has been appointed an 
executive director of Llewellyn 
Construction joined the company 
a year ago as construction 
manager; ^ 

Hr David G. G. Puddle has 
been appointed a direc tor of 

director with responsibility for joined Sedgwick Financial Sen- MANAGERS, to develop and 

vices in October 1869. 

- . + 

GUILD WAY has appointed Mr 
Bobtn Best as finance director. 

. . . . _ .... .the .British .Caledonian. ■ Group, 

ABBA'S, development * has appointed Mr Peter Bralsch 
technology. Be IsjRvir ■ as vice president development, a 

finance, security and administra- 
tion. He joined ASDA in August 
1986 and is currently divisional 
director — finance. Hr MDw» 
Painter beoomesV director with 
responsiblUty for management 
information - . systems -..(IBS) 

sfanal director — MIS. These position whkfa was formerly held Hr David 

appointments are re p l aceme nts jjy. jlr Chris Bouse, who moves Williamson has 

for Hz Laurie. 

■ .-r-*. . : : ' 

Mr Isha Bdnrtb has been 
annotated a director of P. S. 

- ... -jr ... _ s> - 

Sir Garda Bruntofc has been 
appointed to ita board as chair- 
man. Sir Gordon, who recently 
retired from his position as 
managing director and- chief 
executive- -of the. International 
Thomson Organisation,, Jmstaken 
a substantial holding la -Tech* 
press Publishing. . 

to toe llandarin Hotel Group.. 

ted & Lawrence Boyd as assist* 
■nit general manager (corporate 

market institutional ' fund 
management services worldwide. 
Be was with Morgan Grenfell 
Investment Management. 

* . 

appointed as • assistant directors: 
Mr Guy Eastman, Hr Robert 
Schtfi, Ms Wendy PoUecoff and 

“ - - - Hr David 


The chief executive of Dalgety 
UK, Mr Maurice Warren, has 
joined the GDI & Buffus board. 
Balgety’s commodity company. 

Stephen’ A. Evans has become a 
non-executive directors He is a 
stockbroker with Anderson & Co 

Compliance officer. 

Mr Richard W. Hasson has 
been appointed sales director at 
Stockport, part of the textile 
divalon of Whitecroft. He was 
jiniwiMi director. 


Mr Howard Trust has been 
appointed comp any secretary of 

has .admitted Hr David Nash, 
Hr Nick. Reed and Mr Richard 
Renews Into partnership follow- 

BBA GROUP has made-organi- with the dissolution of Robertson 

mmmmjrmnrnt mm m — XlMSfli 

rational . changes. . . Hr. - Ray 
tfitefceU, a mtih. board director, 
takes the roto of group director 
—corporate affairs and assume*: 
a wide portfolio of response 
bflittes in gr o up affairs, the key 
elements of which are.- the 
development pf. major growth 
opportunities and responsibility 
forBBA’s growing investment In 
other groups, Mr peter E. 
director— finance. He was group 
OapptoM: is promoted to grin* 
tiimiMaj controller and deputy 
to the group director— dnancu . 

. v nation*!. . .\r . Islington A Hackney Housing 

Mr OnfstopAer Maud has been ’ , j . .w- tmrmvrc Association, to be its director in 

aopointed chairman and Mir ML FAfaKR PREST BOLDn«^> succession to Mr Mlchati Smit h 
W/H. SkefcUey rad Mr C D. Bpthw^bas appofat^»^ > ^ retires later this year. 
Stowart-Smlth become directors ” * 

of PHICOM^ Hr. Ob Bah Kim director. lec d Gedde s b^xanq NOBLE WARREN INVEST* 
and Hr Ctaa Wbm. Mag have runtexe^attve deputy raamnm. MENTS has appointed Hr Mike 
resriniAd ax directors. ■ ■ • -"“.w 

Young since -Mr. Jda Wilson 

became chairman In 1984. K 


Jmxv 1> Greenwood has. k* 8 appointed Mr Gerard Wheel ty 

Jray ureenwooa ojbl ^ director ^ Abbey ^vest- 

ment Services responsible tor 
fixed interest investments. He 
joins, from Fuji International 
Finance where he was associate 
director In charge of the fixed 
interest portfolio. 


“*■ £££ HOUSING TRUST has appointed 

tw ^Bank of America Inter- ^ ^ Wood, director of New 

■ been' appointed to . to e' board o f 

international. . 

TION baa appointed Mr Stephen 
Oasper as ' director, " capital 
markets, a newly-created post 
He was deputy managing direc- 

resigned as directors. 

Mr. P. J. C M bias been 
appointed - to toe board of 

• • - • • . -■ 
Mr Jamee West baa bear 

Mr FMMp. ft Astoy has 
appointed a director of PRIEST 


• . • - • 

Mr - Taua Quhm, • general 
managar^f JOHN WAI&WOBK 

m ~2 - iriNAnuAij - 

appointed -ma n a gi ng director of ;*««. ■onointc;’ a director. 

am, vwinMPmilftiivi Wild- — - ■ - — 

globe investment trust. 

He aucceoda. Mr • Cato Black, 
who conflimes as an axacatfn 
di recto r and deputy chairman. ]' 

■ fiL ‘ . 

Mr C eia ri a . Hgu a aii Tui been 
appoi nted a s a «cnmal Ivnunager 


tontf 'mtwiili.v'f 

"• Dr Petar B. Garland has joined 

amersham international 
as director of- research. He was 
head of UnBevaris btosdences 

Scxnby as a director. 

The FUJI BANK has appointed 
Mr NaoaH Yokubori as general 
manager of the London branch. 
He will replace Mr H. Klyota as 
general manager at toe end of 
May, when Hr Klyota returns to 
-Tokyo bead office. Mr Yokobori 
comes to London after iwaiwg 
toe Tokyo treasury division. 

Changes at 


has mode toe 'following general 
■management appointments: — Mr 
M. E. Berry is appointed a 
general manager, business opera- 
tions. His area of responsibility 
includes London and toe South 
East of England, relationships 
with national broken and toe 
major commercial dosses of 
business. Mr J. S. Simpson is 
appointed a general manager 
business operations. 3Rg respon- 
sibilities include the west of 
England, west Midlands, north 
west England, Northern Ireland 
and Wales, business development 
with local brokers and agents 
and personal lines and commer- 
cial package business. Hr W. 
J. Ward is appointed a general 
manager, buriness operations. 

G R A N V I L L E 


Grass YWd 

• Company 

Am. am. Hid. Ortlreiy — — 
AM. Brfr. Ind. CULS — *.~~ 
Anntos# sikI Rtody* — v 
BBU OMlfln Group (U6M)~~, 
. Baidhm MM Oraup -m — — 

’■ Bny. Ts efc eefc»n f ss — » 

CCU- Group Ordtoaiy — 

-.CCL Oroun Vlpe Conv. Pf, _ 
Carborundum Ordinary 
Carbomodum 7 Ape PL 
Geers* Wefcr 
. Isis Group 

Jackson Group 

janes SurawBk 

_ . . _ Jamas Burroimb W- . 

7*0 -680 MoWboums NV (AmetSE) 

.417 aw Ueeetd RMgww Ordteaiy 
Record RhJpway Wpe Pf. 
Robert Jenkins 

Toiriay and Carlisle 
Travien HekSnss, 

Uni lock Moldings (SE) 

Walter AhHiander ........ 

w. S. Yeatea 

Price Change 
IS# +1 
IB — 

• 37 — 

'" ’7# ‘ ' — " 

a» +2 

West York*. Ind. Heap. (USM) 

Gnravffle StCon^miy Iladtad 
8 Lovar Lane, Londna £C3B BP 
TdqAcsn: 01-621 1212 
Metnbef ofFlMBRA ' 

Oranvffle Davie* Cclonan limited 
27Ie w la w .loncb n EC3Rffl3T 

E TdqbncOl-GlUU 
MenAer ofthe Stock Exchange 

His resiKHisibflities Include the 
north of England, Yorkshire, 
east England, Scotland, the 
Republic of Ireland, and British 
Fn p ne , and business develop- 
ment with financial services 
intermediaries.' .He is also 
responsible for too claims func- 
tion. Mr Berry, Mr Simpson and 
Mr Ward are al so d irectors of 
Royal Insurance (UK). Mr A.J. 
CampbeQ-Hart is appointed a 
general manager, corporate ser- 
vices and a director. His area 
at responsibility includes 
accounting and finance, corporate 
personnel matters, corporate 
planning and information tech- 




fcmtfii m ^an. 

J. P. Morean & Co. Incorporated 

75,000 Wcurants 
to purchase 

£75,000,000 9% Notes due 1994 

Morgan Guaranty Lid 
. hatogreedtopsmihmetkeNotet . 

.b" *"^m>A milmQMi^cfnmSaKkE nb aBM fiadm 'Rkn M »« ti dwNalwtetoadtoaradt0ftcOgcM 

_! TbeWkqami am being toed at aodcc al£BS0 pat Wtaaut and am cmxdiable many Bfedamdiy withta the ip«M 
2fch Mmt 1587ami27lh Mm 1988 (D0tCbdiiig27fii May; fi»7) rod also on 27th May, YW&Jhe Notasyffl be *»wJ ^ MO 
per «Sph» seemed kwS teftedaaoniuMices^ of OOOOaDdflOjflOO.^ haaatoo tbc Notes** be 

{NepbkamiBall]idMfiat|MQiMmtK^dB(n22toM^lM8. , 




tliGs> . 

Compear of New 
Morgan Boose 

Mr Jim McMahon has b ecome 
a partner at DELOITTE, HAS- 
KINS AND SELLS. Birmingham, 
following two years as a cor- 
porate tax specialist with toe 
firm, while Mr Peter Ward has 
returned to the UK from the 
Zambian practice. 


TIONAL has appointed Mr 
John Burnham a director. 

PAYLESS DIY, part of the 
Ward. White Group, has 
appointed Mr John Hood, as 
financial director. Mr Hood 
joined Marley in 1978 and In 
1983 became company accountant 
at Fayless DIY, then a subsidiary 
of Marley. He became flnanefai 
controller of Payless DIY when 
the company was acquired by 
Ward White Group in 1986. Mr 
Roger Napeltou, head of systems 
development, is also appointed 
to the board. He is responsible 
for toe implementation of elec- 
tronic point-of sales systems and 
all computer functions through- 
out Payless DIY. 

OFFICE has appointed Mr 
Patrick F. JenUn as a deputy 
c h air m an. He also becomes 
deputy chairman of United King- 
dom Provident Institution. Mr 
Jenldn, who was Environment 
Secretary, will succeed Hr Edwin 
Phillips as chairman when Mr 
Phillips retires. 


Mr Phillip A. Lowe , m anagi ng 
CALS, has been appointed chair- 
man in s uccess ion to Mr Alan g. 
Martin who remains on toe board 
as a non-executive director. Hr 
Lowe will combine the post of 
chairman with bis existing 



Mr David Roberts has been 
appointed a director of BRITISH 
ALCAN wire division and British 
Alcan Conductor. He will be 
responsible for toe Port Tennant 
works hear Swansea. Hr Gerry 
Davies has been appointed tech- 
nical director of British Alcan 
Conductor, and Hr BUI Cum- 
mings becomes commercial 
director. Hr John Newton has 
been made a director of toe 
wire division. He will be res- 
ponsible for business develop- 

Banking chief 
at Aitken Hume 

Mr John Cosson has been 
appointed chief executive of toe 
banking group of AITKEN 
Cosson has spent the past three 
yean in charge of the UK cor- 
porate baking division of Stan- 
dard Chartered Bank. 


UACCESS has appointed Hr 
James Cor as finance director. 
Be will join the company on 
June 1 from North British 
Maritime Group where be has 
been group finance director since 


LOTUS CARS has appointed 
Hr Roger Hackrlll as quality 
director. He joins Lotus with 14 
years' experience In toe motor 
industry specialising in effective 
quality control. 


Hr Michael Homewood has 
been appointed managing direc- 
tor (residential) of CUSSINS 
GREEN,, toe property develop- 
ment and portfolio management 
arm of Cuisins Property Group. 
He was managing director of toe 
London division of Broseley 


Hr Norman Arthur has been 
appointed assistant regional 
manager (north) at STANDARD 
LIFE following Hr Derek 
Olhver's retirement He has been 
promoted from toe position of 
Edinburgh area manager and 
takes up his appointment on 
September 16. 


Hr Chris Bailey win become 
finance director of E.C.C. QUAR- 
RIES on July L He is financial 
services manager of the English 
China Clays Group. 


Hr John O’Connor has been 
appointed managing director of 

Hr Bob Moore has relinquished 
for medical reasons his ro le as 
group BMBgjdng director of SPP. 
Reacting. Hr Peter Andrews, 
managing director (operations), 
has been appointed his successor. 
Mr Moore will remain a non- 
executive director. 

Tfot wuMntxm ttampBawiA fa req ui rarta m of the CbtmcB of The Inttrnmanai Stock Exchange of the 
Vw&d Kingdorr. and RtpubSc oflrrlmd Limiial and dots not consriaM an offer of. or m uniwnon to the public 
w subscribe for or to purchase, any Mavises, 

GMAC, Australia (Finance) Limited 

(htcorpmaed n the, Commonwealth of Ausavlia) 

A$ 50,000,000 

13% per ceat. Notes due 1993 

gaaraslEcd as to paym ent of principal and interest by 

General Motors Acceptance Corporation 

(Incorporated m the State of New York) 

Issue Price 101% per cent. , 
and accrued interest, if any 

The following have agreed to subscribe for die Notes: 

Hambies Bank rimit w i 


ANZ Merchant Bank limited 
Commonwealth Bank of Australia 
06£t Lyonnais 

TWulijfa> Runic Paip^ T iiwitwl 

Mri Tanghan Dyson & Cn. limited 
Mmifl Lynch International &Co* 

Orifffi jtrtyal Rank T Imiiwl 

S wi« Wuplc r nr p n ruf inn T ii to m a rimieal Timrfwl 

Banqae Bruxelles Lambert S.A. 
County NatWest Capital Markets Limited 
Credit Suisse first Boston Limited 

McLeod Yoang Weir International limited 
Morgan Stanley International 
Salomon Brothers International Tjmiiwl 

Westdeotsche Genossaisdtafis-Zentndbfflik eG 

Union Bank of Switzerland (Securities) 


Westpac Banking Corporation 

Wood Gnncfy Inc. 

above issue, in bearer form in the denomination of 

United Kingdom and the Republic of Ireland Limited, subject onhr to the issue of the temporary 
Note. Interest win be payable nnnnaTty in arrests on 10th June, the firet payment being made on lOthlune, 

Listing particulars relating to toe Notes, toe Issuer and toe Guarantor are available from the statistical 
services of Pwrf financial tSmiteri and copies may be obtained riming nml business bouts up to and 
rochwfing 26th May, 1987 from the Company Announcements Office of The Stock Exchange and to and 
mdpding 4th June, 1987 from toe fioDowxng:'— 

Haniri— — Hilt TJroHirij 

41 Bisbopsgate, 
London EC2P2AA 

Casnore & C&,, 

32 Tokeahouse Yard, 
London EC2R7AN 

Chanted Bank, 
180 Strand, 
London WC2R1EX 

The Seatrides referred to above have not been n gbte red under Ac United States Securmes Act cf T933 and may not be offered, 
sold or delivered, daeefy tv the United Suaesof America, iu territories or isspoaessiaia or to Unoed Stotts persons. 

21st May. 1987 

Remember, theres more than one high-flying 

Rolls-Royce company. 

BoHs-Eoyee Motor Cars would like to 
congratulate our namesake, Rolls-Royce 
pic, oa the success o£ their recent 

"TCfe 'would also like to commiserate with 
all those investors who didn’t get as many 

that TfalTs-Royoe Motor Cars is part ofanother 
high-flying company 

Rolls-Royce Motor Cars is a division of 

"WdDHsEL(l,ahighljr successful international 
company with a range of activities encompas- 
sing the world leader in neonatal intensive 
care equipment, an international leader in 
ship motion control, a top name in business 
furniture, the widest, range of armoured 
fi ghting vehicles in the world and a leading 
uaanuhetarer of lithographic printing plates. 

lb find out more about another company 
that is going places, send for the recently 

published Vickers Annual Report by filling in 
the coupon. 

!Hie Company Secretary 

Vickers ELC, PO Box 177 , 
Milibank Tbwa; LONDON, 




• ■ -■* 


financial Times Thursday May 21 IfflT 


house arrest 
brings relief 
to US jails 

UHI8 IS Yqvj?, /xk 

®c vmWjv^at 

Nancy Dunne looks at the innovative way 
in which America is taking some of the 
strain off its overburdened prison system 

“THIS IS your Onguard elec- 
tronic curfew check. I will give 
you 10 seconds to confirm that 
you are there.” 

Messages of this sort followed 
by 10 seconds of brisk music, 
are heard in hundreds of homes 
across the US, where convicted 
lawbreakers are paying for 
their crimes under house arrest. 

Since 1980 when the US 
Supreme Court ruled that over- 
crowding constitutes a violation 
of prisoners’ rights, state gov- 
ernments have intensified their 
search for alternatives to build- 
ing expensive, new prisons. 
Thirty-five state governments 
are caught between court orders 
to relieve their overburdened 
prison systems and the demands 
from their citizens that 
criminals be punished. 

House arrest schemes, 
enforced by electronic surveil- 
lance, are growing in favour 
because they allow lawbreakers 
— usually those convicted of 
non-violent crimes— to live at 
their own expense and work to 
make restitution to their 

Ms Bobbie Huslde, a correc- 
tions consultant, says Florida 
has the oldest and most 
ambitious house arrest scheme 
in the US. More than 6,000 
offenders live at home and about 
600 of them are electronically 
monitored. In 1986. these 
criminals paid about $10.3m in 
restitution and 813,8m towards 
court fees and the cost of their 

The recidivism rate was 
much lower than that of 
offenders sent to prison— 19 per 
cent compared with an average 
33 per cent, according to Ms 

She says such programmes, 
with their dose community 
supervision, inspire more 
respect M than the typical proba- 
tion schemes which are often 

seen as ** a slap on the wrist.” 

In Tennessee, overcrowding 
reached the point in 1985 where 
one desperate county sheriff 
handcuffed 12 inmates to a 
prison camp fence because he 
had no room left in bis jail. 
The state has since eased its 
overburdened prison system 
with several experimental pro- 
grammes, Including one private- 
enterprise prison and a house 
arrest scheme for 300 

Last September Tennessee 
authorities instituted the elec- 
tronic surveillance of 40 
inmates, who are equipped with 
non-removable wristlets or 
anklets. Two types of systems 

The recidivism rate for those 
kept under computer-controlled 
surveillance is much lower than 
for offenders sent to prison 

are In use, an “active ” monitor- 
ing system is in place for 
high-risk felons, and " passive " 
surveillance has been estab- 
lished for the lower-security 

The “active” devices, called 
Home Escort systems, are pro- 
duced by BI Incorporated of 
Boulder, Colorado. BI is also 
known for its dairy feeding 
system, which hangs a minia- 
ture transmitter around the 
neck of a cow to signal what 
and how much it eats. 

BI says the Home Escort 
system, which it began market- 
ing In 1985, was the first 
electronic monitoring device for 
house arrests. It equips 

Computers are programmed 
so that offenders can leave their 
homes for work without raising 
an alarm. The aklets, worn 
under socks, are not visible to 
casual observers, so the law- 
breakers can avoid any stigma, 
which would set them apart 
from other workers and make 
their jobs impossible. The 
devices can be worn in the bath, 
while doing any kind of work 
and during strenuous exercise. 

The “ passive ”* system used 
in Tennessee is produced by 
Hltek Community Control Cor- 
poration in Foit Lauderdale, 
Florida. This system, developed 
by two former US Space Agency 
engineers, equips the law- 


(the "Bank") 

NOTICE to the holders oF those of 
the 11.5.520,000,000 7 per cent. Guaranteed 
Convertible Bonds 1987 of Leu mi 

International Investments N.V, presently 
outstanding (the “Bonds”}. 

The attention of holders of the Bonds 
is drawn to the fact that the Bonds are 
convertible into Ordinary Shares of NIS. 

0.1 each of the Bank only up to and 
including 30th june 1987 and that all Bonds 
outstanding thereafter fail to be redeemed 
at par on 1st July 1987 in accordance with 
Condition 5 printed on the reverse of the 

The Conversion Rate at present 
applicable it 70.66667 Ordinary Shares of 
NIS. 0.1 each of the Bank for every 
U-S.51,000 nominal amount of Bonds 

The attention of holders of the Bonds 
is drawn to the fact that holders of the 
Ordinary Shares of the Bank arising on 
conversion of the Bonds have the right 
(in accordance with an arrangement 
entered into between BLL Betti hot (1983) 
B.M. (a subsidiary of the Bank’s holding 
company), and the Government of Israel on 
20th October, 1983) by giving appropriate 
notice to such subsidiary between 
16th August and 30th September, 1988 
to require It to purchase all or any of such 
shares on 31st October, 1988 at a price 
in Sheqels equal to UJ5.S31.30 per Ordinary 
Share, calculated according to the 
representative rate last published before 
28th October, 1988 (subject to adjustment 
in respect of future issues and _ 
distributions), all as more particularly 
provided in the arrangement. 

The attention of holders of the Bonds 
is drawn to Condition 4 printed on the 
reverse oF the Bonds and in particular to 
paragraphs (A)(3), (A)(4). (A)(5) and 
(C)(6) thereof. 

The relevant terms of the arrangement, 
as well as an English translation thereof, 
may be inspected at the specified offices 
of the Conversion Agents listed below. 

Holders of the Bonds who wish to 
exercise their conversion rights should 
apply to the specified office of any of the 
Conversion Agents listed below for a 
necessary Conversion Notice. 

This notice is published in accordance 
with the terms of the Trust Deed 
constituting the Bonds and is not to be 
taken as a recommendation to holders of 
Bonds to exercise their conversion rights 
or otherwise. 


Bank Leumi (U.K.) pic 
4-7 Woodstock Street* 
London W1A 2AF 

Sulk Leumi le-hraei 

34 Cbridenstrasse 
CH 8022 Zurich 

Bank Leumi le-fsradf 
(France) SJL 
30 Boulevard des Itailera 
75009 Paris 

To Holden of: 

The Corporation's 
US$79,000,000 15% Guaranteed 
Notes due 1989 


01-246 8026 

The Corporation’s 
Can 475,000,000 11J% 
Guaranteed Notes due 1990 

for the 



Annual Report and Accounts of the 
Corporation and the Annual Ac- 
counts of the Guarantor, Canadian 
Pacific Enterprise* Limited, are 
available from Orion Royal Bank 
Limited. 1 London Wall. London 
EC2Y SJX. England and the other 
Paying Agents named on the Nos 

APRIL 30. 1987. 


Hourly updated FT Indax 
Sterfing Exchange Rates 
updated 3 times daily 

Button, krugerrands, ptotiresn 

and base matat prices 
Dow Jones Industrial Average 
Share Market Report 

offenders with constantly- 
signalling transmitters on strips 
around their ankles. Receivers 
in the homes pick up the signals 
at random and send them over 
telephone lines to “ host ” 
computers. National Cash 
Register computers, which can 
monitor up to 200 receivers at 
one time, receive and store all 
messages, can sound alarms and 
print reports on request. 

The transmitters, weighing 21 
ounces, are fastened within 
cases by break-off screws which 
require a special tool for re- 
moval. Both cases and straps 
are tamper-resistant and give 
out a signal if cut damaged or 
removed from the ankle. 

Failure to answer the call 
sends the system in pursuit 
railing a series of locations 
where an offender might be. If 
convicts fail to respond within 
an hour, the computer alerts 
probation officers by means of 
their pocket bleepers. 

Critics of the active system 
say it is fallible, because the 
signals will not be received if 
the wearer is behind metal 
objects like a refrigerator door. 
Proponents say it works best 
because offenders are being 
constantly monitored. 

The Home Escort system can 
be leased or purchased and the 
average cost is about 57 a day, 
considerably less than the $32 a 
day it costs to keep an offender 
in prison. The passive system 
is leased at a maximum $2.83 a 
day. Tennessee officials say 
both systems have been “very 
satisfactory” and best of all, 
the offenders have the cost of 
their own surveillance deducted 
from their wages. 



The Financial Times 
proposes to publish its 
annual surrey on 
Corporate Finance on 

JULY 23 

among the subjects 
under review wil! be: 

★ The City revolution and 
how the market has 
changed since Big Bang 

The Corporate Finance 

UR Securities Houses 
The Foreign Securities 
Houses, Accountants 
and Lawyers 

The Equities Market 
New Issues, Junior 
Markets, International 
Equities, Convertible 
Eurosterling Bonds 

The Debt Market 
Sterling and Euro- 
commercial Paper, 
Multi-option Facilities, 
Debentures, Commercial 
Bank Borrowings 


★ Risk Management 

For further information 
please contact: 

David Reed Esq 
Financial Times 
10 Cannon. Street 

London EC4P 4BY 
Tel: 01-248 8000 
ext 3461 

Telex: 885033 




Royal Navy test-bed with 

an eye to nuclear safety 

breakers with either wristlets 
or anklets, depending on which 
is more convenient for the work 
they do. 

Surveillance is conducted by 
a Telsol automatic calling 
device, also used by many de 
paztment stores automatically to 
call customers, deliver mes 
sages, ask questions and record 
answers. The . Telsol unit 
employs an IBM personal com- 
puter to call offenders a> 
random several times a night 
when they era supposed to be 
at home. 

Answering the call, the con- 
victs place a tag an their sur- 
veillance device into a box near 
their phone. This emits a 
sequence of tones over the 
phone line. The offenders then 
pick up the phone and confirm 
that they are at home. 

WHAT happens when x nuclear 
reactor springs a leak? This is 
a question which has exercised 
reactor designers — and Their 
critics— fox decades. Sometimes 
nuclear scientists have tried to 
simulate what will happen, but 
always on a small scale. 

A dearer answer could be 
at hand, however. This cummer 
a unique engineering facility 
comes into operation' in the 
north of Scotland, when the 
Royal Navy commissions 
LAIRD, its loss-of-coolant acci- 
dent investigation zig at Doun- 


The Navy claims that LAIRD, 
at its Vulcan laboratories dose 
to the civil— and better known 
— Dounreay Nuclear Power De- 
velopment Establishment, will 
he the only full-scale test faci- 
lity for loss-of-coolant accidents 
in reactors anywhere In the 
world. No civil facility for such 
experiments exists in Britain. 

Over the next three years 
LAIRD will be used by Rolls- 
Royce and Associates, the 
Navy’s nuclear experts, to study 
the safety of Britain’s n u cl e ar 
submarine fleet present . and 
future. LAIRD is designed to 
■emulate and. follow the course 
of any imaginable accident to 
the primary circuit of a pres- 
surised water reactor (PWR). 

Although it is an exclusively 
Navy project Don Clarkson, 
director of the Vulcan Naval 
Reactor Test Establishment 
says he will be surprised if 
there is no exchange of dataon 
nuclear safety with the - civil 
industry, now building 1,200- 
megawatt FWRs, starting with 
Size well B as the first of its 
proposed “small family” of 
four to six new nuclear sta- 
tions. The civil industry has no 
plans of its own for a loss-of- 
coolant accident simulation. 

LAIRD could also be impor- 
tant In helping to make the 
safety case for small civil re- 
actors, much closer in capacity 
to the naval reactors. Potential 
markets for small factory' 
assembled PWRs as highly re- 
liable powerplants have been 
identified by Rolls-Royce Itself, 
independently of the defence 
consortium Rolls-Royce and 

LAIRD was not built from 
scratch but is an adaptation by 
Rolls-Royce and Associates of a 
shore-based PWR it built for 
the Navy in the earIy-1960*. 
This was a test-bed for success- 
sive designs of reactor core 
for the Navy's nuclear, fleet By 
1888k when this PWR completed 

tiie testing of a third com de- 
sign, ft had seen 18 years of 
service. Its experimental data 
underpins the 50 reactor cores 
built so far for the Navy. 

In 1885, the consortium — 
which operates Vulcan on be- 
half of the Navy— began to in- 
stall a new testbed, called 
PWR 2, prototype of a new 
generation of Navy reactors, 
more powerful but quieter than 
previous models, and also de- 
signed to new safely standards. 
Reactors of this type wQl go 
into Trident missile submarines 
and the next generation of 
nuclear “attack” submarines. 

For the redundant reactor 
tiie endear experts drew up a 
scheme to give it a new lease 



byDavtd HsMock 

of life as an experimental 
facility capable of following 
reactor behaviour under fault 
conditions. This meant major 
additions to its plumbing, so 
that any kind of leak, or fracj 
tore can be simulated safely 
through fast-acting valves, to a 
circuit running at similar prea- 

Over the next three 
years the facility 
will study the safety 
of Britain’s nuclear 
submarine fleet 
by simulating any 
imaginable accident 

6iire to civil PWRs— around 
2,000 2ta per square inch. 

The coolant water which 
drains from the reactor Is 
caught to a dosed system so 

that it can be returned quickly 
to the primary circuit for re- 
peated tests. 

The first step, after removal 
of the last radioactive reactor 
core under test, was to purge 
the primary circuit of radio- 
activity. The consortium devel- 
oped its own chemical process 
for decontaminating the plant. 


of caring. 


Ninety yean ago the D 
professional people -facing 
others to care. 

Succeeding decade* have 
thread has been the know 

tin DGAA was founded to help those who am today’s 
facing Evetiboods that had collapsed - end with very few 

tint ev er y w h er e there are 

thought their plans' for later hfe co mp le te , quite suddenly : 

e, who had 
id m nsclves 

Failing health, savings dashed in value, the shock ofbereavemedt- whatever 
the reason, in eadi case the need for s pee dy help in deep distress has been vital 
The DGAA helps many btmdreds of these unfortunates to stay in their own 
homes and if .needed, offers a service of devoted .professional care in 13 
Uftririenrial and Nhrring Homes. ‘Without dimer sta le a i d, we depend very largely 
on donations from people like you. Please help - while you are able, with a 
donation or a legacy. 


Founded 1897. Paeon HJd. Queen EUoabttk, the Queen Mother 
Dept 7, Vicarage Gate House, Vicarage Gate, 

London W8 4AQ. Tel: 01-229 9341 


(Please make cheques payable to “DGAA”) 

To the Holders of 


Series F, Class F-l 

Pursuant to the Indenture dated as of February 1, 1985 between 
Shearson Lehman CMO, Inc. as Issuer and Texas Commerce 
Bank as Trustee, notice is hereby given that the interest rate 
applicable to the above Bonds for the interest period May 20, 
1987 through August 19, 1987 as determined in-accordance with 
the applicable provisions of the Indenture, is 8*5* Libor per 
annum. Amount of interest payable is $204.6875 per $10,000 
principal amount. 


This process has store hew 
used niooessfafiy to treat 0 sub- 
marine reactor before it was 

For LAIRD, the proce» hu 

reduced the radioactivity to the 
level of a kw-ootivity labora- 
tory— the kind found quite 
commonly to research centres— - 
says Clarkson- It has given hu 
engineers ready access for the 
conversion of the PWR. 

Conversion involved stripping 
•way the propolsku machinery 
from what, was originally built 
■s tire bade half of a complete 
nuclear .submarine, co which ; 
sa&oro conM train. The big 
dyn a mometer used to absorb the 
output of the steam turbine has 
been Bold to toe US Navy. 

The reactor vessel was ultra- 
sonicaUy inspected and pro- 
nounced perfectly fit for Ms new : 
role. (The safety and reliability 
directorate of the UK Atomic , 
Energy Authority is the Navy’s ! 
adviser to safety matters.) , 
Engineers then welded into the 1 
primary dtreeit the nest of new 
pipes and vahtis needed to 
simulate leaks email ones as 1 
well as the so-called “guillotine 
fractures” of a mate pipe. 

LAIRD will be used to simu- 
late faults in all classes of 
Royal Navy’ reactor; Swlftsure, 
Valiant and Trafalgar, as well 
as the new Trident design 
based on PWR 2. Every com- 
ponent and subordinate system 
critically concerned with 
reactor safety can be explored 
in this way, to verify toe com- 
puter codes used by the 
designers of Navy reactors. 
Then the complete reactor 
system wm be tested. 

Initially, all these tests will 
be done “ cold ” since LAIRD 
will contain no nuclear fuel. 
But “hot’’ tests will follow. For 
these an electrical heater will 
be installed to simulate the 
radioactive -decay heat from a 
reactor which has been shut 
down but atm needs to be kept 

Other nuclear laboratories— 
in the US and France, for 
example— attempt to simulate 
reactor faults mring nuclear 
fuel, but under greatly scaled 
down . conditions Involving 
single fuel pins. They are com- 
plex to relate to the real thing. 
The backroom experts at Vulcan 

beyond the 
forger’s art 

■r Geoffrey Cterfid* 

Ses in the US, « i* 

tnths UK from Indentilam of 


Specific chemicals '***■ 
urexzufed tat* the surface af 
the paper, to tbo form of * 
logo for exas’pk; 
When viewed at different 
angles, the design •****?• 
various colours. For pWk 
cards the chemical la applied 
as part of a lamination, but 
If this la peeled off. 
the chemical remains to 
the surface below. The Im- 
print would normally he over 
a picture of Che bearer, and 
tiie company claims that 
attempts to tamper imme- 
diately become obvious. 

Kodak juke box 
holds 7m images 

KODAK of the US has 
announced a large-scale 
document image storage 
and retrieval system based on 
the company's recently de- 
veloped 12 in optical disk, 
which can hold 52,000 images. 

say LAIRD will be the only 
facility able to show how a real 
reactor responds to a fault or 
an operator’s error. Bat it will 
do so without raising the risk of 
a leak qf radioactivity. 

system can accommodate up 
to 131 of the disks in " juke 
box ” fashion. giving 
"wriwmw storage of 7m docu- 
ment images. It uses three 
Digital Equipment Micro vax 
1 computers which allow 
Images from the disks to be 
supplied to many high-defini- 
tion screens in a matter of 

The system costs from 
£006,000 and is aimed at large 
organisations that most have 
ouick access to original 
documents of which a com- 
pletely permanent record has 

Contracts and Tenders 

1 Radian State A gri c u lt u ral Development Project 


of Nigeria afotn of U3S122 million 

JE" 1 *1 Bank 4 or ftacpnatnrctiori end Development towards 

Um co at of Kaduna Stow Agricultural Development Project end It ie 
I!?" 1 * ** p9 the proceed* el tbla loan will be applied to procure 

from the eligible btcjdera the follow in g hemo— 



petrol and diesel driven .. 


Dinar driven Irrigation ■ 
pomp -eat* 80mm .. 

Cereal grinder* Ham m er 
end Pfra Mine 
Tyree and Tubs® 

Suction and de livery Hoaaa 
for pump* SQmtn. 76mm, 


Steel fencing 




120 Oaya 

* BWSfeS document! containing a pacification a, inatroe- ‘ 

SwoSoo '^xhTSSS^ '* mnct ■*' ro * yb * 0bt,ln * d " 

Managing Director, ‘ 

Farm ere supply Company Ltd;, 

13b Kablr Roed.-Metafi, 

P-O. Box 9237, Kaduna. Nigeria. 

Tal: 215281 Telex: 20711 Box: 096 

P-O. Box 9237, kaduna.’ Nigeria. 
Tai: 215281 Telex: 20711 Box: 096 
er on payment of U 3*200 from:— 

AOP Ueleori Agency. 

27 Dover Street, • 

: London W1X SPA. 

Tel: (01) 499 2829 Telex: 298288 
Date of Issuance of Invitation tor bldK IS.May 19S7. 

and time and place for eubmleeton of bide: 29 June i«n 

a i ftScra 

Company Notices 


MH/Mtamnoa and CM» W i 
Immd by KX A* 



dMdanf am, 


Notice a hereby given that Che 

T ^ f * r . Booka 01 thB co "'P»ny 
will be doted front 15th to 19th 

June, 1987, both dates inclusive, 
for the purpose of preparing 
warrants for the Final Dividend 
,, rop'tt of tha Year ended 
31st March. 1987, which wHl be 
Pteted to Shareholders on 14ch 
July. 1987. 

By Order of the Board 
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_ ADMMmiUffB- 

Lawton Wa eelwOfBwfc 

Dublin 4 
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Subortki«i*dU»*n Notes U6Z 


to aroordance with tinlbnns 
andCoodWonsofiha Notes, 
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No»s w« cany an Interest reds 
of 71% per annum, and the 
Coupon amount per USD 
soofioom be usd t9.a05.5e. 

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Financial Times Thursday, Masr 21 1987 



The law is the law but 


A LAW Js a law and never 
mind principles and theories— 
that is the- echo one can hear 
in most English coarts and 

Saw schools. Principles map be 

the right thing for US courts 
which can dislodge roles made 
by Congress and the President, 
using the Constitution as the 
fixed point of leverage, bat not 
for the UK where parliament is 

Quite so — but on second 
thought perhaps not Principles 

and theories, best in the form 

of a bill of rights, are often at 
the root of the difference 
between die “ law of the jungle” 
and M the rule of law.” It is a 
highly practiod difference. The 
law of the jungle protects you 
as long as you an the strongest 
The rule of law restrains the 
strong to protect the weak. It 
is the insurance premium the 
strong pay while they are strong 
to reap the benefits when they 
weaken; as inevitably they win. 

The recent decision from the 
High Court in the International 
Tin Council case tries to tell us 
that there is no way of making 
sovereign traders pay their 
debts. Few people would say 
this is a prono unc emen t emanat- 
ing from the' rule of law. This 
is a social rather then a moral 
issue; if we have no rule of 
law in the market there will 
soon be no market. 

Some governments go even 
more brazenly about the busi- 
ness of striking off their debts 
and obligations. Earlier this 
month tiie Greek Government 
obtained from its parliament 
the approval of what I call Lex 
Andreadis. wiping off $27m 
which it owed under an arbitral 
award to Stran Greek Refineries, 
now In liquidation. - Stran is 
wholly owned by Professor 
Stratis Andreadis. The long 
feud of Prof Andreadis with the 
Government dates back to 1976 
when the Government by a 
decree, the constitutionality -of. 
which he denies, deprived Urn 
of control of the Commercial 
Bank of Greece group, the 
second largest in Greece. His 
equity interest was reduced 
from over 50 pet cent to 27 per 

Over tiie years Prof Andreadis 
became involved in' numerous 
litigations with the r Govefcn- 
meat in an effort to reco u p 
some of his interests or to 
obtain dividends due on those 
Shares which he still baa. One 
of these fflsputes, which the 
Greek parliament was asked to 
terminate, concerns a contract 
concluded by Stran with the 
Government in 1970. Stran was 
to build a refinery at a site 
to be acquired by. the.. Govern-, 
ment. However, - the Second 

military coup of November 
1973 intervened. The site 
chosen for the refinery was con- 
verted for other uses and work 
on the project could not go 
ahead though Stran had 
already incurred substantial 
expenditure and liabilities to 
Greek 1 -and foreign contractors 
and suppliers and had arranged 
loans to finance tiie project 
- The issue remained .in sus- 
pense during the rule, of the 
colonels but the contract was 
formally terminated by a deci- 
sion of the elected Government 
on October 14 1977. 

Prof Andreadis claimed re- 
fund of the expenses and liabi- 
lities. The Government invoked 
the arbitral clause of the con- 
tract and the arbitral- tribunal, 
presided over by the Honorary 
President of the Supreme Court 
of Greece, awarded Stran 70 
per cent of the expenses and 
liabilities Incurred in the frus- 
trated projec t, wi th interest 
approximately 827m- 

This . award; published in 
February 1984, was immediately 
challenged by the Government 
which applied for judicial re- 
view. Both the court of first in- 
stance (in 198S) and the Court 
of Appeal (in 1986) confirmed 
the -award. The Government 
appended further to the Supreme 
Coast of Greece which was 
due to hear the' case this month. 
Prof Andreadis bad some 
ground to believe that the 
Supreme Court would confirm 
the decisions of the lower 
courts. The government seems 
to have feared the same as it 
hurriedly appended to a bill 
pasting through parliament a 
few clauses wiping out the 
arbitral award. Neither Stran 
nor prof Andreadis are men- 
tioned in these chaises which 
ostensibly reinterpret the law 
141/1975, which invalidated 
contracts made by the colonels 
in the years 1967-1974. The new 
measure voids any arbitral 
clauses of such abandoned con- 
tracts and any arbitral awards 
made. It seems that tiie award 
obtained by- Stran was the only 
Important target of this legis- 

Though there may be some 
room for - a reference to the 
European Court of Human 
Rights in Strasbourg, the way 
the Greek Government disposed 
of Prof Andreadis 's claims is 
essentially a domestic affair. 
However, fet* foreign investors 
will be greatly encouraged by it. 

By contrast, the way the Euro- 
pean Community applies its 
an tidump ing rules .may yet 
prove - to -be an . international 
boomerang. This was launched 
by a' series of judgmeutet in 
which the European Court re- 

jected on May 7 1981 appeals 
by a number of Japanese manu- 
facturers of small ballbearings 
against an antidumping duty 
Instituted by Council regulation 

The w>||> complaint In aQ 
these appeals— as -well as in 
those in the pipeline and now 
likely to be abandoned — con- 
cerned the method of calculat- 
ing the dumping margin by the 
European Commission. This 
should be the difference be- 
tween the “normal value** 

charged on the exporter's 
domestic market and his lower 
export prices. The antidumping 
regulation gives the Commission 
a choice of methods of calcu- 
lation — - transaction prices; 
averages, mean prices, most 
frequently encountered prices. 
According to Article 2/9 - of 
regulation 8017 “in order to 
establish a valid comparison, 
tiie export price and the 
normal value should be 
assessed on a comparable basis 
in respect of physical character- 
istic of the product, quantities 
and sales conditions.” 

The Commission used a 
weighted average for calculat- 
ing the “normal” domestic 
price in Japan but compared it 
with an average of only that 
part of the export prices which 
was . under the level of the 
“ normal ” price. The excess .of 
export prices which were 
higher than the domestic price 
in Japan was cut off and these 
prices appeared in tiie calcu- 
lation as equal to the “ normal 
price." The Japanese com- 
panies may have been guilty 
of dumping but such an arbi- 
trary method of calculation 
seems to ignore the reality of 

the market where individual 
transactions are at different 
prices to meet marginal 

The Japanese companies 
complained that the Commis- 
sion obtained in this way a 
lower average of the export 
Brices than aorrespionded to 
reality and that the use of the 
{two different methods made 
he figures incomparable and 
(the result unfair. The court said 
(the regulation said nothing 
about the need to use identical 
methods and rejected the com- 
plaint of unfairness, reasoning 
tihat the Japanese charged 
(higher prices in some trans- 
actions only to achieve an aver- 
age which would obscure the 
dum p in g effect of otheT trans- 
actions. One can only pray that 
a simitar treatment should not 
be applied by others to the sub- 
sidised exports of the Com- 

Not even the -Federal 

Supreme Court In Karlsruhe 
(BGH) keeps always within the 
system which one associates 
with the rule of law. It failed 
to live up to ft when called 
upon to remove one of the 
more obvious privileges enjoyed 
by banks In Germany. 

This concerned the use of 
funds received by * bank for an 
insolvent Client who was In 
overdraft. If he applied for 
the opening of bankruptcy pro- 
ceedings, a hank using moneys 
received for the client after the 
date of the application for 
settling bis overdraft could be 
opposed by other creditors. 
Whether the bank might use 
such remittances for settlement 
of its own claims, if the debtor 
applied instead for a judicially 
supervised settlement with 
creditors, was a hotly contested 
question in German legal 

In case H ZR -293 185, the 
BGH has now sided with the 
banks. It refused all analogy 
with the bankruptcy ordinance. 
To leave no doubt about the 
desired result, the court also 
said that the failure of the 
trustee in insolvency to revoke 
the authority previously given 
by the insolvent debtor to his 
customers, to pay what they 
owed him into his bank account, 
was not. a prohibited special 
agreement This decision 
dearly infringes the principle 
of equality of unsecured credi- 
tors. It is what they call in 
Germany Systemwidrig. Ger- 
man banks, apparently, can get 
an exemption from the rule of 

•Madahw Watson 8k Ca Led v Inne. 

national Tin Council. FT taw Raport. 

May 20 1S8T. 

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South Oxfordshire 

Tba Financial Ttmm I* propping 
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FRIDAY JULY 17 1987 

For full detail*, contact: 

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The continued growth and profitability of our Carbonless 
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MANAGEMENT : Marketing and Advertising 

Financial Times Tbrnsflay May 21 1987 

EVER SINCE 1983 when Novo, 
the Danish insulin and enzymes 
manufacturer, reported pre-tax 
earnings equal to a 28 per cent 
return on sales, analysts have 
been worrying because the 
group has failed to repeat such 
unsustainably high profits. 
Nevertheless in 1986, they re- 
mained a very respectable 19 
per cent of sales. 

This has tended to over- 
shadow Novo's achievement in 
penetrating the vast but hostile 
US market for insulin, one of 
the none-too-many cases in 
which a European company has 
successfully established itself 
in the face of Intense competi- 
tion from a dominant American 
producer, in this instance Eli 


Novo first went seriously 
international in the marketing 
of insulin In the early 1970s 
after it had developed a highly 
purified, so-called monocompo- 
nent insulin, from which all 
the contaminants which set Dp 
anti-body reactions in diabetics 
patients were eliminated. Novo 
believed that the technology 
which it had used gave it a 
five-year lead over its com- 

However, the company mis- 
calculated the American market 
at the outset. “ We entered the 
US market with our own pro- 
ducts in 1979-80," says Sonnich 
Fryland, executive vice-presi- 
dent of the pharmaceuticals 
division. M The basis of our 
entry was that we thought we 
had a superior product, so 
superior that we could turn 
the market round." 

But Novo had not given 
enough attention to the 
enormous cultural and com- 
mercial differences between the 
US and European markets, nor 
could it foresee how its com- 
petitive situation would be 
affected by the actions of the 
US regulators. 

As Novo prepared to enter 
the market, says Fryland Lilly 
began upgrading its own insulin 
products, reducing the level of 
contaminants from over 100 
parts per million first to 40, 
then 20, and finally 10 ppm. 
Novo's highly purified insulin 
contained no detectable con- 
taminants, ie, less than 1 ppm. 

The US Food and Drug 
Administration, the US regula- 
tory body, however, ruled that 
a product with fewer than 
10 ppm could be described as 
“ purified " — the same classifica- 
tion as competitive products— 
but would not permit Novo to 
use the trade mark " mono- 

“ So in 1981 we found that we 
were not permitted to say what 
we believed was the right thing 
— that we had the best pro- 
duct" says Fryland. 

At this point Novo had to 
consider Its options and the 
risks it ran if it tried to take 
on Lilly alone. Novo was then, 
and remains, a company 






Although Novopm contains FDAnapprand insulin, the pen itself needs 
separate approval 

Novo takes on 
US drugs giant 

Hilary Barnes on the Danish group’s strategy 

by the standards of the large 
American pharmaceuticals com- 
panies, with a 1985 turnover 
of DKr 4.1bn (about $540m). 
The comparison became even 
more marked when Lilly's 
marketing power in the US was 
set against Novo’s. Lilly had 
around 1,000 sales and medical 
representatives compared with 
Novo’s fewer than 20. 

The' insulin market is also 
utterly different from that in 
Europe. In Denmark, where 
insulin is a prescription-only 
drug, all pharmacies, of which 
there are only 300. must stock 
a drug once it has been regis- 
tered by the health authorities. 

In the US, where insulin is 
an over-the-counter product, 
there are 60,000 retail phar- 
macy outlets, and they only 
stock a preparation if customer 
demand makes It worthwhile 
to make room in the refrigera- 
tor, as Fryland puts it. 

At about the same time Novo 
stole a march on Lilly by 
becoming the first company to 
market human insulin (the 
chemical make-up of which is 
identical to insulin produced 
by the human body), initially 
in Europe, but by the time 
regulatory approval was 
obtained in the US, Lilly had 
also brought forward Its own 
human insulin. 

“Our option was either to 
go for a very exclusive part 

of the US market or to make 
sure that we had the resources 
available to meet the compe- 
tition," says Fryland. 

The answer was a joint ven- 
ture with E. R. Squibb Inc, 
with which Novo already had 
some marketing links. Squibb 
was then a company with turn- 
over about four times the size 
of Novo's. 

Squibb was already selling 
insulin in the US market, but 
it lacked Novo's production 
technology and was at a dis- 
advantage in tihe US market 
both in relation to Lilly and 
Novo. What it did have was 
the marketing and distribution 

The joint venture, set up in 
1982 on a 50-50 basis, combines 
Novo's and Squibb’s interests 
in diabetics care in the US. 
In Squibb-Novo Inc, Novo pro- 
vides the research and produc- 
tion, Squibb the sales and 

In 1982 Squibb-Novo’s share 
of the US market was about 7 
per cent It now claims 23 per 
cent, though Fryland fudges the 
issue, for competitive reasons, 
as to whether this is volume 
or value. He describes this 
development as "very satisfac- 
tory to us." 

Squibb, too, is evidently 
happy with the business, as the 
field sales force in Squibb-Novo 
is being tripled to 120 in 1987, 

concentrating its efforts on 
hospitals and specialists. 
Squibb’s own sales force is 
more GP-oriented. 

When Squibb-Novo was first 
established, Lilly launched a 
vigorous marketing campaign 
to stop the growth of Novo's 
market share. This forced 
Novo to step up its own market- 
ing efforts which caused a re- 
duction in margins— a reduc- 
tion, however, which Novo was 
strong enough to take. Now 
Fryland describes the compe- 
titive situation as “ normal/’ 

The Squibb-Novo joint ven- 
ture solution caught on. It was 
followed up in 1983 with a 
similar arrangement in Canada 
with Connaught Laboratories 
and in 1984 in Australia with 

The Squibb-Novo co-opera- 
tion, says Fryland, has become 
a “strategic alliance." Novo 
is now selling Squibb products 
in Scandinavia, notably a suc- 
cessful Squibb ace inhibitor 
against hypertension. 

Novo's recent acquisition of 
Ferrosan, another- Danish phar- 
maceuticals company for which 
a bright future in so-called CNS 
(central nervous system) pro- 
ducts is predicted, has further 
cemented the Novo-Squibb 
relationship, as Ferrosan and 
Squibb already co-operate in 
research in the CNS field. 

Novo has now launched 
another campaign to increase 
its US market share with the 
Introduction of the NovoPen. a 
small and unobtrusive injection 
system, about the size of a 
fountain pen, which is used to 
give injections of short-acting 

The advantage of the pen is 
that diabetics can take ft out 
of their pocket or handbag and 

give themselves a dose at any 
time, which means they do not 
have to take meals at set times 
or leave meetings. 

The NovoPen is already a 
success in Europe, though Novo 
lost ground to its Danish com- 
petitor. Nordisk Gentofte, the 
world’s third largest Insulin 
producer (with very little 
activity in the US), when it 
underestimated the demand for 
the pen. 

Novo has considerable hopes 
for the pen in the US. especially 
as Lilly, according to Novo, has 
not developed its own pen. 

But before the pen is marketed 
in the US it has to pass the 
regulatory hurdles. Although 
the insulin used in the pen is 
the same h uman insulin which 
already accounts for about a 
quarter of Novo's US sales, the 
pen is a “medical device" in 
its own right and therefore 
requires separate approval. 

As tile date at which FDA 
approval will be forthcoming is 
unpredictable, Fryland declines 
to predict that 1987 will be the 
year when the company cracks 
the American market. 

Financial advertising regulations 

Transgressors will feel the bite 

Feona McEwan expbunswhat will supersede self-regulation 

FINANCIAL investment com- 
panies is the UK win goon have 
a new set of rules to learn and 
live by which, for the first time, 
will impose upon , them a statu- 
tory standard of advertising 
practice. Just as companies 
dealing in insurance, life assur- 
ance, unit and investment trusts, 
have-been given the green light 
to market more freely, post 
Big Bang; so the web of regu- 
lations to keep them in check, 
grows. For the investor, this 
means more protection. For the 
marketer, more red tape. 

Unlike previous codes of 
conduct governing investment 
advertising, administered by 
bodies like the Advertising 
Standards Authority and the 
Stock Exchange, the new batch 
is legally binding and carries 
drastic penalties. Severe trans- 
gression could result in a trans- 
gressor losing his credentials 
and a company ceasing trading. 
Investors who lose their money 
as a result of a company breach- 
ing the rules wOl be able to sue 
for losses. These regulations, 
dictated by the Financial 
Services Act. come into effect 
from the end of the year. 

For advertising agencies, 
used to self-regulation from 
relatively toothless industry 
bodies with restricted powers 
of enforcement, this will be a 
new straltjacket to cope with. 
For financial companies - used 

to the rarely exercised auth- 
ority of . the Department of 
Trade and Industry, this will 
demand a more diligent reading 
of the fine . print. 

At the year end. all invest* 
meat businesses will come 
under the auspices of a regu- 
latory body— either the Securi- 
ties and Investment Board, the 
City watchdog, or one of five 
self - regulatory organisations 
(SROs) or, if they belong to a 
profe s sion, to that professional 
body (these include ' the four 
chartered accountancy bodies 
and three taw societies). 

The five SROs are the Securi- 
ties Association (born out of the 
Stock Exchange). Association of 
Futures Brokers and -Dealers, 
Financial Intermediaries 

Managers and Brokers Regula- 
tory Association, Investment 
Management Regulatory Organi- 
sation and Life Assurance and 
Unit Trust Regulatory 

First off the .mark has been 
the SIB, which has now Issued 
its doorstop of a ratebook. 
When it came to drawing up Its 
advertising rules, which make 
up one section of the tome^ the 
board examined codes 

of practice in the UK, US and 
Australia and consulted adver- 
tising industry bodies. . After 
subsequent revisions, the 
original blank sheet of paper 
is now some 14 pages- long. 

(The whole book la two indies 

STB vules have already come 
in for some criticism from 

future usees who comptein that 

they are excessively compli- 
cated. However, such criticism 
h usually yoked to such a way 
that indicates the c o rnph m ams 
understand the terms pretty 
clearly. The' reason for ouch 
detailed and exact rules is the 
fact that they are answerable 
in law. For the bulk of invest- 
ment companies, this precision 
is very new. 

Ultimately the . SIB rules 
governing advertisements 

should become the responsi- 
bility of a given trustee or 
gr o up within the investment 
company, the SIB suggests. 
Agencies, too, will need to 
grasp the essentials as they 
could be held responsible for 
the work they put out 

Subjects covered by the SIB 
rules range from tombstone and 
Image advertising to Press or 
television coupon ads, known as 
off-the-page or off-the-screen 
ads. As well as stipulations 
about fairness, honesty, and so 
on, . there are specific rules 
about such matters as attaching 
warnings of risk to a given pro- 
duct but not in small print or 
In minimised form. Again, tele- 
vision coupon ads are not per- 
mitted unless repeatedly acces- 
sible by investors, for Instance; 

through Oracle or cable. 

Nor Is there any scops for 
persuasive raarhetiftg jargOB 
tike "free trial period wheo 
referring to the slnidP 
tng statutory cooling o* period. 
Where appropriate tbit must 
be spelt out that it is conferred 
by law. 

Some rules, like those about 
misleading ads, will be adjusted 
If necessary aa complaints 

Although no one knows Just 
bow the ratebook will work 
until it goes into effect, the 
ST B expects complaints to come 
to it mainly from tavraoor*. 
Depending on the degree of 
transgression, the offending 
company may be reprimanded 
or have Its authorisation «us* 
pended. Investors who lose 
money can go to court to re- 
coup their losses by bringing 
•a action against the invest- 
ment company. There is also a 
large number of procedures 
open to cotnplainaDts. including 
independent investigation, for 
example, by the Ombudsman. 

At tiie moment, other SROs 
are busy drawing up their own 
rules. In many cases there will 
be variations, though the SIB, 
for one. is keen to minimise 
those differences— H different 
codes would be bard to handle 
— with a common core of rules. 
The end of July should see the 

More UK than US companies use PR 


BRITISH computes are way 
ahead of the their US counter- 
parts in the use of pnbUe 
relations, claims a new report 
on the use of PR on both 
sides of the Atlantic pub- 
lished by Shandwick, the 
UK's leading quoted public 
relations . consultancy. 

The report based on a 
survey of 200 chief execu- 
tives hi the UK and 200 In 
the US, is In direct contradic- 
tion to previous surveys which 
have suggested that American 
companies enthusiastically 
embrace PR- 

A survey carried out by the 
Gait Byoir consultancy, for 
Instance, found that some 
84 per cent of the top 500 US 
companies used PR con- 
sultancies In 1984— -compared 

with 89 per cent of ■»■*«■» 
sized British companies. 

The Shandwick survey, 
however, found that nearly 
80 per cent of the 200 UK 
chief executives surveyed — 
from both large and nail 
companies and in an Indus- 
tries— regularly used an ex- 
ternal PR consultancy. 

But in the US, only four out 
of every 18 of the chief 
executives surveyed — from 
similar sized companies as the 
Bri tish survey — said that 
their company used a con- 

Moreover some three out at 
every 10 of the British com- 
panies also bad an internal 
PR department — compared 
with just 15 per cent of the 
US companies: 

Shandwick - suggests 
"equally striking la the fact 
that over haH of British thief 
executives interviewed have 
formally integrated public 
relations into their corporate 
planning system, compared 
with one third of US top 

The results of the surrey 
nuy prove embarrassing for 
Shandwick since it hmi 
recently made a number at 
acquisitions at US public rein-, 
tians- consultancies , and la 
keen to -develop farther In 

* But It proves the market 
potential for us In America,"' 
Peter Gummer, ShaudWtek’a 
chairman points out from 
New Tone tills week. 

Gammer, however, admits 
initially to surprise at his 
survey's findings. “ But when 
I told people over here about 
the survey they were not at 
all surprised," he says. 

He also believes that British 
chief executives have become 
more aware of PR than 
their American counterparts 
because at their need to eem- 
. nmnicate during mergers and 

“What this survey also 
-means Is that British public 
relations specialists no longer 
have to feel like tbe poor 
relation when dealing with 
their US counterparts.” adds 

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Financial Times Thursday May 21 1987 


Piccolo’s 40th anniversary/Milan 

Michael Coveney 

The Piccolo Theatre in Milan, 
one of the greatest of Europe’s 
post*War companies, is forty 
years old. The cake was. cut 
last Thursday by its founding 
director and inspirational 
powerhouse, Giorgio Strehler, 
who has directed most of the 
productions since the doors, 
opened on May 14 1947. 

To mark the occasion, 
visitors could see both 
Strehler's latest production, 

Elvira, o la passUme teatrale. 

and his oldest and best loved 
(now in its fifth or sixth edi- 
tion), Arlecchino servitore di 
due padrone. 

In between, the indomitable 
Strehler, now 85 years old, 
followed his first acting appear- 
ance since the War in Elvira 
with a cheerleading chairman- 
ship of his own party under 
the television lights, hosting 
an Improvised cabaret and 
nostalgia jag interspersed with 
satellite link-ups with John 
Gielgud at the Old Vic, Maurice 
BdJart and Iris troupe some- 
where in Spain and the popular 
french singer Barbara in Paris. 

The celebrations were also 
joined by M Francois Leotard, 
the French Minister of Culture, 
and ids predecessor in the 
Socialist government, H Jack 
Lang (who received warmer 
applause and a Strehler bear 
hug), to underline the Parisian 
link in Strehler’s Theatre of 
Europe initiative; by Marie 
Hfelfenc Da st 6, daughter of 
Jacques Copeau whose Vieux 
Colombiers operation, along 
with Brecht’s Berliner Ensemble 
(also founded in 1947), was the 
Piccolo's creative ensemble 
example; by Barbara Snkowa, 
singing from The Threepenny 
Opera and speaking for actors 
throughout Europe; and by 
such distinguished longstand- 
ing colleagues as Tino Carraro, 
Valentina Cortes e, the desig- 
ner Ezio Frige rio. the composer 
Fiorenzo Carpi, and the widow 
of the Piccolo’s co-founder, 
Paolo GrassL 

There were telegrams, too, 
from Samuel Beckett. Federico 
Fellini, Willy Brand and 
Francois Mitterand. this latter 
produced by Strehler with an 
especial flourish. 

Gielgud's recital of Profe- 
pero’s renunciation - of magic 
was icily impersonal and be- 
devilled by technical hitches; 
one felt he was taking part as 
a gentleman, not as a fan. As 
Gielgud tetchily released Ariel 
to the dements, Strehler’s own 

recent Ariel. Ghdia'Lazzarini, 
flew out of sight on a steel 

SQlan has promised to com- 
plete the new Piccolo for 
Strehler by 1990. Elvira and 
the party took place Ut the new 
Teatro Studio, a large spacious 
arena with a horse-shoe audi- 
torium, . ostentatiously new 
brick work and .red steel 
galleries, seating for 450. 
Strehler appeared in black, 
faintly simian of feature and 
luxuriantly • white-haired, and 
withstood the applause for two 

He - introduced the play, 
Eltrira Jouvet 40, which was 
adapted last year by Brigitte 
Jaques from transcriptions 
made of. a series of seminars 
given by Louis Jouvet over a 
period of -seven months prior 
to the German Occupation . of 
Paris in September 1940. 

Jouvet. Copeau’ s protege, 
and a key figure in the Strehler 
pantheon of practical intellec- 
tuals . was instructing students 
at the Conservatory, and an 
actress called Claudia, on that 
scene in Mo litre’s Don Juan 
(Act IV, scene 6) where Elvira 
appeals to the road to pall back 
from the brink. 

The play, a rather dull and 
dusty affair, was premiered in 
Strasbourg. Strehler has made 
of ft a riveting study at sense 
and sensuality, toying with the 
dark illusions of dramatic per- 
formance -and a director’s creati- 
vity. A plaintiff row. of f bob 
lights bisects the vast floor. 
Elvira is pleading with a mute 
Don Juan, but is herself the 
object of Jouvet/Strehler’s in- 
structional pleading. The seven 
lessons are broken up by sounds 
of War and projected footage of 
the . Nazi advance through 

The Piccolo was a product of 
the War in that Strehler and 
Grassi wanted to unite the 
people of a great city in a com- 
mon cultural cause. In Elvira, 
Strehler rehearses many of his 
recurring arguments about im- 
passioned truthfulness, the 
sense behind gesture, the 
quality of tenderness. He 
reveals a lot about himself, too: 
an infalli ble eye for grouping 
among minor characters, im- 
patience- with doppiness, an 
obsession with text (often for- 
gotten In appreciations of (he 
visual banquets he serves np), 
and sheer star quality. Claudia 
is. played by Giulia Lazsarini, 
who is both technically con- 

As part of the celebrations, founding director Glor 
oldest and best loved production, Goldoni’s “Ar 

o Strehler chose to pat on his 
o servitore de due padrone" 

trolled and convincingly impro- 
visatory as she works towards 
the seventh scene delivery of 
her vainly heart-rending sup- 

In another happy coincidence, 
it was Jouvet’s 1947 revival of 
the play that introduced Don 
Juan to die modern repertoire 
after almost three centuries of 
neglect Strehler has waged a 
similar campaign on behalf of 
Goldoni, renewing the corn- 
media delTarte conventions in 
the light of modern sensibilities 
in sexual, domestic and mercan- 
tile affairs. 

The first Piccolo season com- 
prised Arlecchino and plays by 
Gorky, Salacrou and Calderon. 
Unlike the Berliner Ensemble 
or the Moscow Art in its early 
days, there has been no contem- 
porary house dramatist. Instead, 
the received dramatic literature, 
from Shakespeare to Ibsen, 
from Pirandello and Strindberg 
to Beckett and Bond, has been 
subjected to interpretation of 
microscopic intensity and an 
unfailing aesthetic of good 

I have seen the Piccolo’s work 
at various ports of call, most 
regularly in recent years in 
Paris. ArleccMno, it is chasten- 
ing to remember, has never 
been seen in London (an early 
version was at the Edinburgh 
Festival of 1956). It Is a classic 

production of prodigious energy 
and charm that is now, Strehler 
swears, in its last embodiment. 

There is no furniture apart 
from three beautiful standing 
screens and a couple of large 
trunks for the last act clothing 
confusion, no scenery save a 
pure white traverse and cyclo- 
ram a. Otherwise, all Is illu- 
mined by candlelight (that is 
tiie illusion, at any rate) and 
an interior scene Indicated, for 
Instance, by two servants hold- 
ing candelabras to make an in- 
formal arch. The costumes are 
exquisite without being precious 
or fustian, the acting explicit 
and sure without being coyly 
alia commedia. Since 1947, 
Strehler has had but two 
Arlecchinos, Marcello Moretti 
and, in the job since 1962, 
Ferruccio SolerL 

Soleri has said that as he 
gets older, so Arlecchino be- 
comes younger. There is indeed 
a childish spontaneity in his 
antics that is deeply moving. In 
the trunk, he finds himself en- 
meshed in a white smock and 
reverts, startlingly, to perambu- 
lator habits of squeaking and 
flailing. The serving of two 
meals remains a masterpiece of 
timing , food flambdd and 
thrown from behind the 
screens, plates and tureens des- 
patched on teasing trajectories 
while Soleri remains in full 

flight in the opposite direction. 
On Friday night, not a fork hit 
the deck. 

The frustrated romance of 
Florindo and Beatrice was beau- 
tifully played by Franco 
Graziozi (another survivor from 
1962) and the huskily voiced 
Andrea Jonasson, the latest of 
Strehler’s wives and a limber, 
sexually intriguing object of the 
innocent Clarice’s (Susanna 
Marc omen!) experimental over- 

Arlecchino plays in the old 
Piccolo itself— an agreeably 
modest 600-eeater with no archi- 
tectural or decorative preten- 
sions— until May 29. Strehler 
will continue work on his Foust 
(he will take the title cole, 
surely a diabolical match for 
any Mephisto?) scheduled for 
the Studio next year. 

Strehler’s has, in a sense, 
been Europe’s longest-running 
one-man show; there is no pro- 
vision for a successor. Just as 
be derives bos methodology 
from Stanislavsky, Copeau, 
Jouvet and Brecht, so 
Strehler’s example is followed 
by Planchon, Cherceau, Stein 
and Bondy. It has been an 
astonishing career and I shall 
not be at all surprised if, once 
the new Piccolo (seating 
L200) is under way, Strehler 
starts planning his ' golden 
jubilee of 1997. 

Danish Ballet Festival/Copenhagen 

Kiss Me Kate/Qld Vic 

I start from the premise that 
Kiss Me Kate is not one of Cole 
Porter's best musicals. Nor is 
it one of Adrian Noble's best 
productions. The underpowered 
and visually chaotic proceed- 
ings that have arrived at the 
Old Vic after a Stratford pre- 
miere in February and an 
extended tour in the provinces 
represent neither the best of 
the American musical theatre 
nor anything resembling an 
intelligent ESC vintage. 

The quarrelling Kate and 
Petruchio in a Baltimore try- 
out of the play were based on 
the Lunts; the backstage ruse 
in Sam and Bella Spewack’s 
book creates a good setting for 
the physical rough and tumble. 
The Lucentio has signed a 
gambling debt on to Petruchio, 
two hoods come to collect. 
Kate is in hock to a Sugar 
Daddy, Bianca hoping for her 
big legit break and ogling 

Mr Noble and his designer 
William Dudley have done 
nothing to freshen the piece 
with any application of homo- 
genously modem or creative 
style. Instead it is taken at face 
value and presented as a messy 
hotchpotch of a mock Renais- 
sance fit-up show plonked in a 
familiar world of standing fiats, 
lights, sunbaked medieval per- 

Michael Coveney 

spectives, gaudy front cloths 
and costumed (by Liz da Costa) 
with unbelievable vulgarity in 
dashing pinks and oranges, 
black and white checks, printed 

Because a musical was writ- 
ten in 1948 Is no reason to keep 
reminding your audience of the 
fact. Paul Jones is a proven 
artiste in his own musical and 
performing sphere, but bis 
voice does not have the depth 
and richness (X do not neces- 
sarily require Howard Keel) for 
the score. Nichola McAuliffe has 
the vocal beating of everything, 
and is especially good at inflam- 
ing the lumbering "I Hate 
Men,” but she works so hard 
she ends up charmless. One 
should also expect an RSC show 
(this is a co-production wifi 
tiie commercial management. 

Triumph) to make us f«el that 
their relationship matters. 

Most surprisingly of all, the 
choreography of Ron Field is 
routine and old-fashioned (I dc 
noc necessarily require roller 
skates), except for those 
sequences involving the miracu- 
lous Tim Flavin who makes an 
elegantly manoeuvred silk purse 
of the sow’s ear “Bianca" — with 
true class, he finishes every- 
thing he does so beautifully. 

The sound system is just 
about tolerable. Apart from the 

wonderful “ So In Love Am I," 
in which Miss McAuliffe sacri- 
fices vocal luxuriance for emo- 
tional anxiety— the one spot in 
the show that strikes home— 
" Brush Up Your Shakespeare " 
comes off best, as it should. The 
gangsters are blithely and 
delightfully played by John 
Bardon, a former “ Max Miller." 
as a potato-faced loon seemingly 
set in concrete, and the People 
Show alumnus Emil Woik. 

If you have to see the show, 
go for Wolk. He plays a jumpy 
zany — for one just returned 
from Strehler’s Piccolo Theatre, 
the Harlequin references else- 
where are too much to contem- 
plate — sucked into showbiz as 
Kate’s reluctant minder. But he 
likes the mirror the moment he 
barges into the dressing room 
and by the wedding scene he 
has stuffed himself into a dress 
and Is pulling a gun on the 
flute accompaniment to a 
McAuliffe trill. 

Come the second act. he has 
acquired a hat of fruit and an 
interest in manicure; his 
Carmen Miranda phase is 
brutally curtailed by the off- 
stage putsch which invalidates 
the debt and sends Kate back 
to Petruchio. What Mr Wolk 
achieves with this role is in 
itself, and I would say alone, 
worth the price of admission. 

Bruce ballets/Sadler’s Wells 

The final programme of the 
Ballet Rambert season is made 
up of three works by 
Christopher Bruce. and 
dedicated to him “as a way of 
saying thank you ” for his long 
association with the company. 
Bruce as a dancer is inevitably 
remembered for those crucial 
years when the Rambert troupe 
assumed its new identity, and 
his interpretations in many 
works seemed to set a seal of 
excellence upon the fresh start 
made by the company. Not long 
after am p his first choreo- 
graphies, which also helped 
confirm the innovatory energy 
of the re-fashioned Rambert, 
and since that time he has con- 
tributed largely to the fixing of 
tiie company’s identity. 

Reason indeed to thank him, 
though I do not feel that Tues- 

Clement Crisp 

day’s triple bill did full justice 
to his creativity. Dancing Dag 
is thatched choreography, 
homespun in manner, and 
deeply sincere about peasant 
carolUngs. but it started as a 
work for students and is best 
left to them (two of the per- 
formers were, in fact, pupils at 
the Rambert School). 

Ceremonies was created last 
year, with four couples moving 
from Elizabethan courtly 
behaviour to reveal the beast 
beneath the skin and the lusts 
of the flesh that make animals 
of the participants. There are 
hints, too, of The Rite of Spring 
in a final sacrificial section, but 
for all its sexual grapplings the 
dance looks decorous rather 
than orgiastic. 

Bruce at his best, poetic and 
sure in his means, is happily 

to be found in the closing 
Night with Waning Moon. This 
uses George Crumb’s setting of 
Lorca fragments for a capriccio 
about the commedia dell’arte 
characters. With superb design 
by Pamela Marre showing a 
dark colonnade beneath a 
starry sky, the cast in white or 
brilliant tatters, the dance 
hints at drama, at relation- 
ships, and matches the ravish- 
ing ly spare sonorities of the 
score with movement no less 
allusively rich. 

It is a fine work and finely 
danced by its cast, which in- 
cluded Ben Craft as Pierrot. 
Siobban Stanley as Columbine, 
Mark Baldwin as the Captain, 
and Bruce Micbelson as Pierrot. 
An excellent account of the 
score came from Doreen Walker 
with the Mercury Ensemble 

Jonny spirit auf/Teatro Massimo, Palermo 

William Weaver 

After a lapse of nearly a 
decade, the Danish Ballet Fes- 
tival has been restored, allowing 
visitors to Copenhagen.* con- 
centrated and happy Immersion 
in the Royal Danish Ballet’s 

In a departure from tradition, 
the opening performances at the 
end of last week brought the 
Copenhagen debut of the Ham- 
burg Ballet under its director, 
John Neumeier. Neumeier'* 
ballets are already In the Royal 
Danish repertory; his Romeo 
and Juliet and tiie Amleth, on 
which I reported 18 months ago, 
are ranch admired. For tiie 
Festival we were offered two 
works, very different In style, 
which yet provide a by no 
means uncharacteristic portrait 
of his company: The tody of 
the Camellias and the Saint 
Matthew Fusion. 

Camellias vnes made for the 
Stuttgart Ballet in 1978, and 
it develops the line of John 
Cranko’s full-length studies of 
Marcia Haydee. Its d la numidre 
de homage is, though, marked 
by Neumeier’s taste for allusion 
aqd correspondences. ' Its struc- 
ture, aa we know from the Stutt- 
gart Ballet’s - .performances in 
London. Is a theatrical conceit 
that tells Marguerite Gautier’s 
story Chinese-box fashion. Start- 
. ing from -'the outer shell of an 

auction of Marguerite's belong- 
ings after her death, it moves 
—box within flashback box — 
to the tragedy of Axmand’s 
obsession with Marguerite and 
an Interwoven comparison with 
the love of Des Grieux for 

It is a cunning structural 
exercise whose leisurely exposi- 
tion aits with surprising right- 
ness upon an accompaniment of 
Chopin piano works. Inevitably 
the piece stands or' falls upon 
the quality of its two- central 
characterisations. Haydee and. 
Richard Cragun, in the original 
were all .ardour and worldly 

With the Hambnrg troupe 
Colleen Scott seemed at . first 
un emphatic, underplaying Mar- 
guerite as * divinity of the 
demi-monde. But her delicacy 
of means,- which probes ever 
more skilfully as tiie action pro- 
gresses into Marguerite’s fever 
of body and spirit, paid final 
emotional rewards, as we under- 
stood her view of the courtesan 
as a victim of society as well as 
of her own decency of f/eling. 
And, because of the incandes- 
cence of Ivan Li ska’s Arm and, 
we sympathised both with him 
as a young man of blazing 
Romantic temperament, and 
with Marguerite, unable to re- 
sist such ardour. Lisk a, indeed. 

Clement Crfsp 

dominated the action, sweeping 
like a whirlwind through each 
scene: he is a dance-actor whose 
external power comes from an 
inner .fire. 

. The Hamburg dancers pro- 
vided sound dramatic support, 
though their dance style did not 
seem sufficiently sophisticated 
to convince one that tills was 
the finest theatrical hokum. 
They were far more impressive 
in the Saint Matthew Passion. 

To provide a danced illustra- 
tion to the entirety of Bach’s 
Passion seems at first an action 
so arrogant that thunderbolts 
shonld be the only proper 
punishment lor such hubris. 
But dance as illumination of 
both the scriptural narrative 
(which is the text sung by The 
Evangelist) and of the recita- 
tives and arias given to soloists 
and chorus (which are medita- 
tions upon the gospel incidents) 
has certain parallels in the idea 
of Mystery Flays and even in 
the German musical tradition 
that produced the Passion. 

Where Neumeier has been 
most theatrically deft is in the 
contrasts he has made between 
literal presentation of incidents 
(the mocking of Christ; the 
agony on the -Cross; Judas’ 
suicide) and: freer choreo- 
graphy that feeds on the con- 

templative element in Bach’s 

Very apt is the visual lan- 
guage of the staging. The dance 
area is surrounded by pitch 
darkness. The only properties 
are benches on which the cast 
sit, and which can form the 
Cross and a prison. The cast 
are white-dad — the women in 
shifts, the men in trousers and 
tunic tops. The movement is 
expressionistic in . manner, 
studied in its simplicity, occa- 
sionally balletic (half the girls 
wear shoes, the others are bare- 
foot; so, too, the men) and the 
dance relies upon images 
clearly sprung from the words, 
without seeming dutifully con- 
strained to mimicry. 

Dynamic crescendos are re- 
served for a few powerful inci- 
dents — aa when the crowd 
shouts for Barabbas to be 
released to them — but much of 
. the writing relies upon soloists 
and small ensembles, who bring 
absolute conviction to Neu- 
meier's sometimes shocking but 
always logical Inventions. On 
Sunday night, when the 
Passion was given at the Royal 
Theatre, the role of Christ was 
taken by Anders HellstrOm in 
a performance impossible to 
fault Quietness, physical dig- 
nity and a refined beauty, 
extreme concentration and con- 

trol, marked this interpretation, 
extraordinary in its purity and 
communicative directness. 
Opposed to his radiant sim- 
plicity was Ivan Liska’s Judas, 
no less commendable in its 
despair, and ideally matched in 

Of course, Bach’s music (in 
a dramatically bright and 
specially recorded performance 
under Gtather Jena, with Peter 
Sohreier leading the soloists) so 
dominates our perceptions that 
movement may seem an act of 
supererogation. Yet Neumeier’s 
vision compels respect. It recalls 
in its physical immediacy the 
religious paintings of Stanley 
Spencer, and is no less sincere. 

During the Festival, which 
continues throughout this week, 
the Royal Danish Ballet is 
showing some of the best of 
its current repertory. Bournon- 
ville represents the glories of 
tiie past; the possibilities for 
the future were rather less con- 
vincingly on view in an evening 
of new choreographers by 
Erling Ehasson, Jan Thomsen, 
Anette Abildgaard and Warren 
Spears. Apart from Eliasson’s 
neatly made Sextet to some 
Shostakovich piano duets, the 
offerings seemed to me un- 
worthy of display outside a 
workshop. They made fine 
dancers look foolish. 

Palermo’s Teatro Massimo, 
performing temporarily in the 
less than happy setting of the 
Polite ama Garibaldi while the 
historic house undergoes reno- 
vation, continues to present one 
of the most attractive and 
stimulating seasons in Italy. 

Having inaugurated its 
operatic year with a revival of 
Respighi’s tare Se m inoma, the 
Massimo has again made musi- 
cal headlines with a splendidly 
conceived and executed produc- 
tion of Ernst Krenek’s Jonny 
spielt auf (given in Italian 

Though the Krenek opera is 
surely betteHmown, at least as 
a title, to Italians, in tiie 
theatre here it is almost as un- 
familiar as the Respighi. After 
a radio broadcast in 1958, 
Jonny was staged at the 
Florence Maggio musicale in 
1963, and this production was 
seen also during the Florence 
season two years later. Then: 

I attended one of those long- 


There was a telephonic con- 
fusion which changed (he title 
of William Douglas-Home’s play 
Portraits, and suggested that 
director John Dexter was also 
the author. 


Have your F.T. hand delivered . 

every working day, if you work in the 
business centres of 


And ask for details. 


in<> in ;i i: mi imsim-s 4 '. 


' l&BMrt H l.llMU Nl - IW Hi - ' 1 

Arts Guide 

Muric/Mondqr. Open and BsBet/Tussdsy. Vmeh w Wednes- 
day. Btoto ft to na /Thureday. A vatecOv* guide to an the Arte 
appears each Friday. 


May 15-21 


Metropolitan Momma: 48 key Impres- 
sionist end Post-Impressionist 
work s fr om ith e Courtauld Coll ect ion 

tOQT ADfiDCfl| VOlkS by 

r^wmi, Manet. Renoir, S e ura t and. 
Gangnxn. Ends June 2L 


Hhtfiliffrny 30 £2 hj 

permanent collection trace the use 
of bridges as symbols of modernity 
and the past is works by Dumas 
Bakins, Winslow Hamer, Raphael 
Soyer and Louis Loxcwick among 
others. Ends May 24. 


Art Imtitate: The 1985 Grand Palais 
iwrHhit of Lartigue's 1920s photo- 
graphs shows the evocative panora- 
mas and fleeting m o ments on the 
streets of Paris between the wars. 
Ends Jane 28. 


fate GaBeiy. Tomer in the oew 
re Gallery: ‘Die Turner Bequest, 
teh amounts to nearly 300 oil 
nttwg c, finished and rnifinwhed, 
I a further 19,000 or so watered- 
's and drawings, has been a 
ice of co n trov er sy and dissan- 
a ever since it came into the na* 
i*s hands more than 120 years 
l Turner had a lway s wi s hed tor a 
tey to himself which would show 
■«yortg of bis work. Whether be 
old have approved of James Stir- 
g*g extension to the Tatty a smfr 
b mating is a question. The 
ger T—ititiBg n may be hung too 

low for one trim lived to a more os- 
tentations age, and tiie tast efu l oat- 
meal Stirling baa decreed bar the 
principal galleries is a far cry from 
the rich plum he is known to have 
prefer red. The vulgar neodeco of 
the entrance hall ton Bitie to recom- 
mend it But ei ght rooms for paint- 
togs and one tor watercolours give 
room enough, and with the time rfr 

serve galleries upstairs, every point- 
ing but the few to restoration or on 
loan is an the walL 


Jon athan Borofsky: 61 works from the 
unco n ventional young New York 
artist in an integrated show of in- 
stallations, painting, sculpture, 
light, sound and movement. Two fa- 
mous pieces, The Man with a Brief- 
case Hammering M*n, are in- 
cluded. The latter, juxtapos ed 
against a humane Japanese God- 
dess of Mercy statue, makes an 
ironical comment on Inml culture, 
Male Aggression and M aid enfon n 
Woman parody American pop cui- 
tnre. Tokyo Metropolitan Art Mu- 
seum, Visa Park. Rads June 7. 
fTnanri Mon 


Venire: Palazzo Grasse The Arcimlxd- 
do effect 1 : a curious and s ti mulating 
exhibition centred on the neglected 
16th century Milanese mannerist 
painter, Giuseppe ArCxmboldo. 
Much appreciated in his own life- 
time for his extraordinary co mp o- 
rite portraits, to which the fe a t u re s 
of the ”***»• would be composed of 
the tools of his trade. - Pots, pans 
and vegetables he tiie cook (which 

turned mvci^ iim mi Iiwwiwi mare- 
ly a st3Hfe)orbook5 for the librar- 
ian. -Archxibaldo spent most of his 
working life outside Italy, in the ser- 
vice of three Hapsbarg emperors. 
Incl ud ed is bis arresting portrait of 
Rudolf U as the Etruscan god Ver- 
tunno, made up of fruit, vegetables 
and ears of com. The exhibition con- 
tains works by Arctmboldtfs prede- 
cessors, saefa as Leonardo, Dozer 
and Bosch, as well as those of artists 
active to the early years of tiie 20th 
century. It att e mp t s to draw links. - 
some obvious (Dali, de ChiriCQ, Man 
Ray and Duchamp). Bads May 3L 


Madrid. Diego Rivera. A retrospective 
29th century top exponent of Mexi- 
can art, this show offers an ample 
collection of his works, metoding a 
film with his fresco Hmafe 100 oil 
tempore paintings, UO l»nl 3- 
tostratioos. Centro 5e Arte Betoa 
Sofia, Santa Isabel 52. &ids June 7. 


Berthe Morisot: More than 40 oils, 
pastels, wate rcolours, crayons and 
sculptures retrace the developm en t 
of the woman painter who, influ- 
enced at first by Corot, became a 

friend of the im p re imi nwig tK and 
took part in their first exhibition. 
Galene Waring Hopkins, Alain Tho- 
mas, 2. roe Mimmwtnfl (42855105). 
Opened all days ex c ept Sundays 
and tmwhrtma. F-nds June 27. 


A m s terdam . fSenwe Set World 
Press Photo exhibition. Ends May 


ago Florence performances, but 
the memory is dim. I simply re- 
call that tiie work made little 
impression. So I made the 
journey to Palermo more out of 
a sense of duty than with any 
real eagerness or curiosity. 
This time, the impression was 
quite different, however. While 
unready to proclaim Jonny 
spielt auf a masterpiece, I can 
attest to its vigour, skill, and 
charm. It is immensely enjoy- 

The enjoyment in Palermo 
was both visual and auraL The 
opera is hard to categorise: the 
marvellously absurd libretto 
(by Krenek himself) inspired 
a score in which all sorts of 
apparently contradictory 

elements— from Jazz to operetta 
to Puccini and Richard Strauss 
- — are imaginatively and effec- 
tively blended. The set-designer 
Emanuele Luzzati created a 
series of bright synthesised 

scenes, convincingly portraying 
such tilings as a singing glacier, 
a homicidal locomotive, a 
pracitical automobile. Santuzza 
Cali’s costumes also managed 
to be both good-looking and a 
bit caricatural. 

Filippo Crivelli, who has not 
only considerable opera 
experience but also a know- 
ledge of intellectual cabaret, 
was fortunate in having a 
strong cast: and he used them 
well, never allowing the 
singers to mug, while encourag- 
ing them to move— even dance 
—with a free grace. 

If you adhere strictly to a 
tally of the bars he has to 
sing, Jonny is not really the 
protagonist of the work (it has 

none); but with h Is infectious 
verve and his great musicality. 
Bruce Hubbard, in this title- 
role, seemed to inspire, to 
energise the whole perform- 
ance. The warm, supple bari- 
tone voice was matched by 
enthusiastic high spirits. 
Dancing, clowning, singing, he 
was. throughout, the complete 

Jan Caley was Max, the 
composer: a bright high tenor 
of effective clarity. As anita. 
the singer, Fiorella Pediconi 
did full justice to the difficult 
soprano writing, with its melt- 
ing lyrical phrases; and Silvia 
Baleani (Yvonne, the French 
maid and Jonny's girl-friend) 
also sang with confidence and 
incisiveness. Daniello, the 
virtuoso violinist, is meant to 
be irresistibly seductive. The 
baritone Kalin Topalov was not 
that (unless you have a pen- 
chant for wooden acting); but 
he was vocally correct and did 
nothing to mar the success of 
the evening. 

Much of that success was due 
to the young Swiss conductor 
Karl Martin, who relished the 
quirkish score, punctuated by 
muted trumpets, banjo, and 
other eccentricities; but Martin 
also maintained a good pace, 
while allowing the singers to 
phrase comfortably. The text 
was not always clearly enunci- 
ated (though Mr Hubbard's 
words were almost unfailingly 
intelligible), but the fun came 
through all the same. The 
Palermo orchestra and chorus 
(carefully prepared by Mario 
Taeini) were in admirable 

Saleroom/Susan Moore 

Sackville silver sells 

The Trustees of the Knole 
Estates are selling the family 
silva?— or at least some of it 
Some 80 lots of Sackville stiver, 
described as surplus to require- 
ments. were sold yesterday at 
Christie’s for £708,598 (1 per 
cent bought in). Christie's 
South Kensington had dis- 
persed £38, 480-worth of 
less important pieces on Mon- 
day. The spectacular Carolean 
and Regency silver will, how- 
ever, remain in the house and 
on view to visitors. 

As expected, the most 
coveted lot proved to be four 
George IH silver-gilt wine- 
coolers made by the great Paul 
Storr in 1813, and applied with 
festoons of vine tendrils and 
ram's-mask handles. They went 
to an anonymous purchaser for 
£229,000 (estimate £100- 
£150,000). A large George H 
circular pierced bread basket, 
by Thomas Farren. 1725, 
tripled its lower estimate, 
going to London dealer Jacques 
Koopman for £66.000. Engraved 
with the Royal Arms, it was 
probably part of the official 
plate of the 1st Duke of Dorset, 
Lord Lieutenant of Ireland. 

Of the (incomplete) ambas- 
sadorial service the third Duke 
acquired for his Paris embassy 
in 1784 the most spectacular 

pieces were two pairs of two- 
handled circular soup tureens, 
again with raros-mssk handles, 
made by William Pitts in 1782 
and 1783. Probably as a tribute 
to French taste they were 
modelled on pieces made by 
goldsmith Robert-Joseph 

Auguste in around 1770. Both 
lots went to Koopman, for 
£52.800 and £39.600. 

A further Crown connection 
is marked by a silver-gilt tray 
with basket-work sides, given 
by George HI to his godson, 
George Frederick Sackville 10 
years after his birth in 1803. 
Made by John Pitts or Joseph 
Preedy, it soared to £41.800. 
A pair of rare George IV 
parcel-gilt candlesticks with 
applied swans proved even 
more successful, going for 
£28,600 (estimate £5-8.000). 

Part II of the T. Y. Chao 
Private and Family Trust Col- 
lections of Chinese ceramics 
and jade was sold at Sotheby's 
in Hong Kong on Tuesday for 
a total of £14,814,927, with only 
three per cent bought in. Part 
I had set a number of records 
and this 3ale proved true to 
form with £863,076 being paid 
for an early Ming underglaze- 
red vase, a world reeord for a 
Chinese ceramic. 

B „aa Times TmnJg Ml' a) IM ? 


Telegrams; Rnantimo, London PS4.Tetex; 8954871 
Telephone: 01-2488000 


Thursday May 21 1987 

Calling a 

An expensive 

path for other 

spade a shovel u an i™ f n f a l^ P 

CmCOEP’S DECISION to an? case short of primary B ■ B m WJ w\^ wM-UV 

raise its bad debt provision 
against sovereign loans to 
developing countries to a 
quarter of its portfolio is a 
notable step towards realism. 
It may still be some way short 
of c alling a spade a spade; 
many of tbe bankers involved 
will admit — unattributably — 
that only an optimist would 
expect to recover three- 
quarters of the sums which 
have been advanced, and the 
secondary market in develop- 
ing country debt applies a 
larger average discount. 

AH the same, Citicorp is at 
least a long stride nearer to 
reality than most competing 
US banks, or for that matter 
London banks. It is a typically 
aggressive move, and some 
banks will find it a painful task 
to match it as the stock market 
quickly recognised yesterday. 

Painful or not every advance 
towards realism, is to be wel- 
comed; for it is only now. when 
the banks are collectively 
approaching the position where 
they can absorb their true 
losses without disruption, that 
realistic solutions to the debt 
crisis can be discussed. 

any case short of Primary 
capital by international stand- 
ards. will find themselves in a 
double bind if they try to 
match Citicorp's standards of 
realism, while the Bank of 
Japan strives to move towards 
convergent international stand- 
ards of prudential control. 

By William Hall in New York and 
David Lascelles in London 

For all these reasons, there 
must be a very uncomfortable 
and possibly protracted balance 
sheet adjustment before the 
system can move on to the next 
stage, consolidation. Consolida- 
tion of nominally short-term 
lending into long-term or 
irredeemable bonds on toler- 
able terms has always been the 
desirable end of the debt saga. 

Painful share 

Large hole 

It may well be that the case- 
by-case approach through re- 
scheduling was adopted in the 
hope that the borrowers faced 
what was only a liquidity 
problem, and could meet their 
obligations, given time. Tbe 
reality of commodity gluts and 

The fact that even now the 
banks are barely able to con- 
front the losses Involved only 
confirms t hat the whole 
laborious process of recent 
yearn has been buying time 
for the banks to some purpose, 
even though this has given no 
real relief to the borrowers. 

Governments, which will have 
to bear a painful share of the 
losses through reduced tax 
revenues in the next few years, 
cannot just sit and suffer in 
silence. The members of the 
Paris dub, who have shown a 
generous realism in reschedul- 
ing official claims — most re- 
cently with Argentina — must 
now prepare themselves to help 
with the consolidation of com- 
mercial debt 

developed country protection- 
ism has stifled this hope. Tbe 
borrowers can only pay their 
way if they are given some real 

Most banks will unfortunately 
find It a great deal harder than 
Citicorp to position themselves 
for a realistic restructuring. 
Many American banks will find 
that such a balance sheet trans- 
fer makes an unacceptably 
large hole in shareholders 

British banks, which work 
under different supervisory 
rules, may find that such pro- 
visioning will leave them short 
-of - the official standards of 
capital adequacy (under exist- 
ing US rules, primary capital 
is only reduced when losses 
are actually written off, rather 
than when provision is made). 
Japanese banks, which are in 

This may involve direct 
guarantees of the bonds which 
will replace the loans, or the 
provision of capital for inter- 
national bodies to do tbe same 
job; and it will also involve 
direct or indirect help with the 
process of target-setting and 
monitoring which will no doubt 
be a condition of any such 

“ Securitisation, M the fash- 
ionable word in the markets, is 
altogether too slick a descrip- 
tion of what is likely to be a 
laborious and fairly costly 
search for an acceptable solu- 
tion. Citicorp, in blunt words 
and fairly demanding deeds, 
has opened this last chapter, 
and all credit to it Even Citi- 
corp, though, will probably find 
that more win be demanded of 
it before the dosing sentence 
is written. 

T HE SHOCKED reaction of 
the financial markets yes- 
terday to news of Citi- 
corp's sadden $3bn provision 
for Third World debt shows 
how fragile confidence in the 
banking system remains, even 
now, five years after the crisis 

Inevitably, the sight of the 
US’s largest bank reversing its 
earlier reluctance to sacrifice 
profits for the sake of a stronger 
balance sheet has triggered 
fears of renewed turmoil on 
the debt front. 

However, a more cool-headed 
response to Citicorp’s dramatic 
action may well evolve from the 
welcome it received among 
other bankers and banking 
supervisors yesterday. In these 
quarters, it was widely described 
as an exemplary step by Mr 
John Heed, Citicorp’s 48-year- 
old chairman, to bring realism 
to the debt problem, and soften 
the intransigeance which many 
banks, Citicorp among them, 
have shown in the past. 

Even if all this means that 
Citicorp shareholders are $Sbn 
the poorer today, the group as 
a whole is better placed to ab- 
sorb whatever shocks lie ahead, 
and consider novel solutions. 
The questions now are whether 
other banks can afford to fol- 
low that example, and if they 
do, how quickly that brings re- 
solution ofthe debt crisis any 

Citicorp had planned its 
move with some care. Last 
Friday night it sent each Citi- 
corp director more than 200 
pages of information to prepare 
them for Tuesday's board meet- 
ing at Citicorp’s Park Avenue 
headquarters in mid-town Man- 
hattan. Several of its senior 
country officers were flown to 
Miami on Monday to await the 
outcome of the board’s de- 

Assuming that the board 
backed the proposal, they were 
instructed to hand deliver a per- 
sonal letter from Mr Reed to 
the presidents of Brazil, Mexico, 

That was not an argument that 
Mr Reed accepted, and since 
taking over in 1964 he has been 
building uP reserves, a policy 
which he indicated during a 
recent visit tP London that eh 
intended to pursue, even at the 
expense of hurting the bank’s 
profit record. 

The reasons behind the 
timing of the move are less 
clear but appear to reflect the 
abandonment in the last few 
months of Citicorp's hopes that 
key borrowers such as Brazil 
would find their own way out 
of the debt morass. 

As a former senior Citicorp 
executive commented yester- 
day; "This pots another nail 

The key measure 
of success will be 
seen in Citicorp’s 
share price over 
the coming months 

Argentina, the Philippines and 
Venezuela at 5.00 pm New York 
City time on Tuesday. The 
letters were delivered after 
Citicorp’s board unanimously 
supported Mr Reed's plan effec- 
tively to reduce by a quarter 
the value of the bank’s $14Bbn 
sovereign debt exposure. 

The plan is particularly 
striking coming as it does from 
a bank whose former chairman, 
Mr Walter Wriston, was famous 
for arguing that since countries 
never go bankrupt there was no 
pressing need for banks to pro- 
tect themselves against loss. 

A misdirected 

energy policy 

THE LENGTHY paper on 
energy policy which Britain's 
Labour Party published as a 
codicil to its manifesto yester- 
day raises several important and 
neglected questions, but begs 
even mere. 

It rightly points out that 
Britain's good fortune in pro- 
ducing nearly 25 per cent more 
energy than it consumes will 
not last. As present reserves of 
North Sea oil run down, the 
country is likely to become a net 
importer of energy, perhaps 
within 10 years, and it would be 
wise to give some thought to 
the consequences. 

Labour can also point to con- 
siderable confusion and Incon- 
sistency in the Thatcher govern- 
ment’s attitude to energy 
policies. It proclaimed the 
virtue of market forces, the 
need to reduce state invention 
and the folly of central plan- 
ning. In practice It com- 
promised. It hung on to control 
over trade in North Sea gas, 
rejected proposals for privatis- 
ing British Gas in a way which 
would increase competition, is 
actively trying to maximise 
British jobs in the North Sea, 
and has protected British Coal 
axainst the full impact of lower 
world energy prices. 

These compromises reflect a 
deeper dilemma for all West- 
ern governments. The desire to 
give market forces full rein 
runs up against a powerful 
cartel in the oil industry, 
natural monopolies in gas and 
electricity, protectionism in 
the oil equipment and power 
engineering sectors, and above 
all in emotional drive towards 
national self sufficiency. All 
this gives rise to political un- 
certainties which make it diffi- 
cult for private capital markets 

to take the very long view that 

is needed in the energy sector. 

subsidies to highly profitable 
multinationals like Shell and 


In a period of low oil prices, 
the tax burden on new develop- 
ments needed to be eased and 
there may be a few sensible con- 
cessions yet to be made, but 
there is no case for a subsidy. 
It would be better to leave the 
oQ in the ground and to use the 
money in a more competitive 
part of the economy. 

The proposal to revive a 
national oil company is also 
muddled — a fossil from a by- 
gone period. Since all the large 
North Sea fields have probably 
been discovered, a national 
company could hardly obtain a 1 
foothold In the area without 
major acquisitions, most likely 
by re-nationalising Britoil or 
Enterprise Oil. It is hard to see 
what purpose this could serve i 
except to change them into con- 
duits for pouring money into ! 
uneconomic wells. 

in the coffin of Wriston’s argu- 

But Mr Wriston was not alone 
in taking this view. Partly, no 
doubt, because of the example 
he was setting but also because 
of the strong pressure to main- 
tain steady earnings growth. 
US banks are among the least 
well cushioned against Third 
World debt loss. On average, it 
is estimated, their reserves 
amount to less than 5 per cent 
of their loan exposure. 

By contrast, many Continen- 
tal banks such as the Swiss, the 
French and the Germans have 
provided to the tune of 20 or 
30 per cent for large sovereign 
borrowers, and have written off 
some smaller ones entirely. 
Their motive is not solely pro- 
dence: many banking authori- 
ties mandate provisions, and 
in. countries like France where 
the banks are state-owned, profit 
considerations take second place 
to provisions. Tax, accounting 
practices and other factors also 
play a role. 

Attention now focuses on the 
condition of other big players 
in tbe US financial community 
such as BankAmerica and 
Manufacturers Hanover Cor. 
po ration which have large ex- 
posures to the troubled Third 
World countries but are less 
well capitalised than Citicorp 
which, before this week, bad 
about $15bn In capitaL 

Bankers said yesterday that 
the performance of these banks 
in the world’s stock markets 
and money markets would be 

Fiji's stubborn 

Fiscal incentives 

Yet Labour's argument for 
more intervention, subsidies 
and price controls is thin and 
unconvincing. In the North Sea, 
for example, it is anxious to 
ensure that every last drop of 
oil is extracted from existing 
fields and from the smaller 
fields now waiting for develop- 
ment. Even with oil at ¥20 a 
barrel, much of this oil is un- 
economic to produce. Since the 
Conservative government has 
already abolished oil taxes on 
marginal fields. Labour’s plan 
to “introduce fiscal incentives” 
would in practice mean banding 

Strategic necessity 

The suggestion that " security 
of supply " agreements are 
needed with oil companies is an 
even more bizarre throwback, 
since oil companies are now 
falling over each other to supply 
every corner of the market. 
Similarly Labour’s pledge to 
shield gas consumers from tbe 
effect of rising North Sea gas 
costa is hardly the best way of 
achieving its sensible objective 
of r educing the growth of con- 
sumption and imports. 

For all that, the party is right 
to emphasise the dangers of 
complacency. Oil prices will 
rise again, perhaps when 
Britain is heavily dependent on 
imports. Energy conservation 
is a strategic and economic 
necessity and the suggested 
direct grants to pensioners, the 
poor and the public sector i 
could prove a good use of ! 
national resources. 

The same cannot be said of 
Labour’s uncritical acceptance I 
of the coal lobby's expansionary ; 
demands without any constraint 
from world markets. Expensive 
coal may provide jobs for 
miners but it will destroy jobs 
elsewhere in the economy by 
pushing up electricity costs. 

similar ly, existing nuclear 
power plants are an important 
national resource which a job- 
creating government could ill 
afford to throw aside. Some of 
the party's leaders know this. 
It is a pity they dare not say so. 

UNTIL last week the managers 
of Fiji's five commercial banks 
had three busy days each month 
— two government employee 
pay days, and one joint meet- 
ing of the island state's Asso- 
ciation of Banks. 

The military coup, and its 
aftermath, have changed all that 
writes Chris Sherwell, the TVs 
man covering the emergency. 

Heavy withdrawals of de- 
posits were followed by the 
new regime ordering a total 
bank closure last Monday. 

They reopened on Tuesday 
1 to handle record volumes of 
business, as depositors, most of 
them from the TT| dian com- 
munity, streamed in to with- 
draw their savings, mostly in 

As the government-owned 
National Bank of Fiji with- 
drawals of uP to 20,000 Fiji 
dollars were not uncommon, and 
at one stage the Reserve Bank 
had to be called upon for 

Throe branches of the bank 
bad to be closed temporarily 
after anonymous telephone 
callers threatened to blow up 
the premises if they were not 
closed. Other branches had 
armed soldiers strutting 
through the banking halls. 

Because of exchange control 
regulations tbe Fiji dollar did 
not come under any pressure. 
But those who took currency 
out of the country and tried 
to change it abroad found it 
impossible to get a realistic 
exchange rate. 

The ending of tbe coup on 
Tuesday night meant business 
slackened yesterday. In Suva 
everything ground to a halt 
alter rampaging Fijian gangs 
roamed the capital beating 
Indians, smashing cars, and loot- 
ing shops. 

For the bankers, however, the 
most delicate moment came 
when, with the military's 
attempted suspension of the 
constitution, the banks were 
told by the new regime that 
the Reserve Bank no longer 
existed and that the Governor, 
Savanaca Siwatibau. was sus- 
pended from his post. 

At that point a story of cour- 
age began to unfold. Sitwati- 
bau, who is highly respected 

Men and Matters 

by the banking community, and 
had taken the news of the take- 
over badly, decided to stand his 

At the s am e time the banks, 
with equal resolution, refused 
to recognise the new regime, 
spurned all requests for advice 
on how to run a hanking system, 
and insisted on the continued 
operation and backing of the 
Reserve Bank. 

Against the banks' advice, the 
regime ordered tbe closure of 
the banks pending the outcome 
of a meetin gwith the ministry 
of Bnance. 

That meeting was attended 1 
by the Reserve Bank Governor i 
— and the banks both refused 
to recognise Peter Stinson as 1 
minister of finance, and said i 
they wool dnot work under an 
illegal system. 

By that time it was clear 
that the regime wanted the 
banks to reopen in order to 
create an impression of nor- 
mality. The banks In turn in- 
sisted that the regime, having 
ordered the closure against 
their advice, should also 
announce the reopening. 

By nightfall Tuesday it was 
becoming dear that the banking 
system, the Reserve Bank, and 
Sts governor, had come through 
their immediate ordeal safely— 
although civil unrest still clouds 
predictions about the future. 

— S 5 ? 

_ 10, wo 

I 7 ,505 

l\ tt»*® v ** 

II 7 ,020 

1 1 Ch*** — 


1# 150 




-l,* 89 







monitored very closely over the 
next few days. 

Standard and Poor’s, one of 
tbe two leading US credit 
rating agencies which re- 
affirmed Citicorp’s debt ratings, 
described the move as “a posi- 
tive response to a deteriorating 
situation” but warned that 
"strains created by such re- 
serve actions may permanently 
weaken lower rated entities 
with mediocre fundamentals.** 

XBCA, the London bank credit 
rating firm, estimated yesterday 
that it would cost severall banks 
their entire projected 1987 
earnings to raise their pro- 
visions to Citicorp levels at one 
go. (See table). 

One senior foreign banker 
based in New York described 
Citicorp's action as a "sane and 
sensible move” and said that 
it is merely recognising what 
the stock market has been say- 
ing for several months: that 
the value of the sovereign debt 
of the big US money centre 
banks is between 25 per cent 
and 50 per cent less than is 
carried in their books. 

The immediate response of 
the major US banks has been 
muted. J. P. Morgan, which 
has traditionally been the best 
capitalised of all the money 
centre banks and is relatively 
less exposed to the Thud World 
debt problem than its peers, de- 
clined to comment on Citicorp’s 
action. But privately Morgan 
executives indicated that they 
would be watching the reaction 
of the financial markets over the 
next few days and had been 
spending a lot of time naming 
through “what If scenarios. 

J. P. Morgan could easily 
match Citicorp’s move and un- 
like Citicorp it would not have 
to wipe a third off its share- 
holders’ equity. However other 
banks are less able to afford a 
similar sort of house cleaning 
of their balance sheets. Bank 
^America, the. second . biggest 
banking group which has been 
buffeted by. huge loan losses 
over the past couple of years, 
has indicated that it does not 
plan to Increase its loan loss 
reserve of 3 J.8 per cent of total 
loans, which before the Citi- 
corp announcement was the 
highest of any major US bank. 

In a prepared statement 
BankAmerica said that its re- 
serves are "appropriate for the 
asset mix In Its overall port- 
folio. We are aware of no de- 
velopments which would pro- 
duce a need for adjustments 
to this reserve.” 

Mr Reed went to some lengths 
to stress at a crowded press 
conference on Tuesday that 

2,645 - 

•S' *>- 

1 \ 5 .*» ■ 

Uadi*" 4 • 3 . 

\b**cW* *’ 

, 3259 
. 1.6*5 

70 0 
6 34 






• Ainmlng In Mif at Barclay* and NatWatt addition* 75 par earn rmm Atsutninp In caaa o# Lloyd* and Midland 

addition 30 par cant laaarva . .... 

— Foot motor borrowora: MMfoe. Braatt. Argentina, Vanaxuala Source. 1BCA 

Citicorp’s action, which wQl 
result in far and away the big- 
gest quarterly banking loss in 
US history, was not trying to 
set a standard for the US 
banking industry. 

"This is very much a Citicorp 
decision. It reflects the realities 
that we have a very specific and 
very large commitment to all of 
these developing countries. We 
are the biggest bank in the 
Philippines, one of the most sig- 
nificant swawriaf institutions in 
Brazil, a large and significant 
factor in Argentina, the largest 
foreign bank in Mexico and wo 
have a significant presence in 
Venezuela,” said Mr Reed. 

"Our situation makes it 
particularly important for us 
to be In a position of leader- 
ship and we felt, frankly, that 
it was important to ns to be 
appropriately reserved,” said 
Mr Reed. 

-The- -bolstering- of^-the -loan- 
loss reserve is designed to give 
Citicorp maximum flexibility to 
undertake the second key ele- 
ment in its strategy — the liquid- 
ation of a substantial part of its 
$15bn Third World debt ex- 
posure through debt/equity 
swaps, asset sales and other 
measures. Citicorp stresses that 
the action does not reflect any 
redaction in its commitment to 
help troubled Third World 
borrowers. Indeed, its board of 
directors passed a resolution to 
this effect on Tuesday, but it is 
clear that Citicorp wants to in- 
sulate its sovereign debt prob- 
lem so that it can focus its 
attentions on the growth of its 
core banking businesses. 

Hie key measure of whether 
Mr Reed succeeds in his gum hie 
win be seen in Citicorp’s share 
price over the coming months. 

Citicorp's action also poses a 
dilemma for British banks, 
whose reserving levels have 
tended to be on the low ride, 
and it was significant that the 
Bank of England took the oppor- 
tunity yesterday of pointing up 
tile need to bolster them. 

Hardest pressed will be Mid- 
land Bank which has £S.4bn out 
to Brazil, Mexico and Argentina, 
but whose capital position fol- 
lowing losses suffered through 
its temporary ownerriilp of 
Crocker National Bank in Cali- 
fornia. is not the strongest of 
the dearers. Sir Kit McMahon, 
the bank's new chairman and 
former governor of the Bank of 
England, ordered a special 
£160m provision In March 
against Third World debt But 
it wjs ^calculated by bank 
analysts at GreenweH Montagu, 
Midland’s independent stock- 
broking subsidiary yesterday, 
that a further £600m will be 
needed to match Citicorp's new 
reserving levels. The com- 
parable figures for the other big 
dearers are Lloyds £500m. and 
NatWest and Barclays £SOOm 

If British bankers do respond 
to these sew pressures, the 
effects win probably become 
visible when they announce 
their interim results next July. 
Yesterday they were unwilling 
to speculate on how they might 

Many banks, however, in the 
US and elsewhere will lack the 

resources to match Citicorp, and 
this could lead to some less we!* 
' come consequences. It would 
accelerate a split between banks 
with high and low reserves, 
further straining the unity 
which bankers need to posh 
through the complicated loan 
rescheduling packages to pro 
vent tbe debt problem getting 

For their part, the borrowing 
countries will be quick to argue 
that as their Joan get written 
down by the banks, so their 
obligation to repay is reduced 
as well. Banks will fight this 
tooth and nail (Citicorp was 
careful to stress tills week that 
it had not actually written down 
loans), so the effect of Citicorp's 
move could actually be to 
increase tension between the 
banks and their country credi- 
tors, at least in the short term. 

In the longer run, it will 
obviously be helpful in resolv- 
ing the crisis if the banks feel 
more confident about their 
ability to swallow losses. Those 
banks who can write down 
loans will also be better placed 
to sell them off in the secondary 
market where Brazilian assets, 
for example, are now trading at 
60 cents on the dollar. This 
might even help start a junk 
bond market in Third World 
debt to tap new and more specu- 
lative sources of investment 

Although this would not pro- 
vide the countries with new 
money, it would enable banks to 
clear their balance sheets oi 
long term debt and consider 
different ways of funding the 
Third World’s needs. 

! The Don’t Knows are 28 per 
cent ahead in the polls ” 

Artistic spirits 

expectations, the venue has 
been changed. 

She will now perform in the 
out-of-the-way Hitomi Hall — an 
apparent casualty of the local 
whisky war. 

For Kathleen Battle, alas, is 
associated with Suntory’s com- 
petitor, Nikka, following her 
appearances in Japanese TV 
commercials singing tbe praises 
of the rival brand. 

including two moves to Europe, 
and two to the US. 

Van Cuylenbwg’s latest shift 
of scenery will take him from 
Bedford, where he has been 
managing director of the Texas 
British operations for the last 
two years, to Austin, Texas. 

La his new post he will be 
in charge of the group’s artifi- 
cial intelligence unit, a job that 
makes him one of the higest- 
placed Europeans ever in foe 
US company. It puts him on a 
similar sort of level to tiiat 
achieved by Robb Wilmot, foe 
former ICL boss who was hired 
from Texas to poll the British 
computer group out of trouble. 

As head of Texas British 
operations, van Cuylenbnrg, 
aged 39, has established a repu- 
tation as an articulate execu- 
tive in an industry which is not 
short of managers with strong 
views. He will be moving to 
the US at a time when Texas I 
results have shown a distinct 
turn for the better after a 
tough period of losses in 1985, 
and when the European indus- 
try is also demonstrating re- 
newed vitality. 

On tiie question of Europe, he 
is strongly enthusiastic about 
the recent merger, which 
brought together the semi- 
conductor interests of Thomson 
of France and SGS of Italy, say- 
ing that it is "strategically and 
conceptually right.” 

But he adds that the deal — 
partly orchestrated by one of 
his old Texas colleagues, 
Jacques Noels of Thomson — 
will be difficult to execute. 

£**&:**#%? WJ rnm 

The Case of 
the Tailor’s Hands 

(from ammpublished 
adventure of Mr. Sherlock 

“But Holmes, how on 
earth did you deduce that 
our mysterious visitor 
.acquired his wardrobe 
readyto-wcar - and from 
Chester Barrie?” 

Price of a meql 

A strong suspicion that Japan’s 
whisky war has spilled over 
into the concert hall is growing 
among Tokyo's music lovers. 

Next week's visit of the 
soprano Kathleen Battle, to sing 
at Tokyo’s new showpiece 
concert hall, owned by the 
drinks company Suntoty. had] 
been anticipated as the I’Hmar 
of a celebratory series of 
concerts marking foe opening 
of the halL 

Suddenly, contrary to all | 


If any proof were needed that 
the semiconductor industry is 
one of the most international in 
foe world, consider the career of 
Peter van Cuylenbnrg. 

In the last 13 years of work- 
ing for Texas Instruments, the 
Dallas-based company . which 
invented foe pocket calculator, 
he has changed jobs sue times. 

The Confederation of British 
Industry is unrelenting In its 
pressure upon Chancellor 
Lawson for lower interest rates. 
David Nickson, tiie bosses’ 
president, returned to the 
attack when sitting by him at 
foe CBI dinner. 

Recalling that when Lawson 
had turned up for a CBI lunch 
recently he had owned to doing 
his bit that very morning 
towards shaving off } per cent, 
Nickson challenged, "Surely a i 
full-blown CBI dinner should i 
be worth twice that ...” 

~‘ < Corac now, Watson. The 
man had not been in 
London long enough to get 
made-to-measure garments, 
yet everything about him 
said, *Savile Row*. Surely 

you observed the 
hand-made button holes and 
foe natu ral horn buttons? 
The precision of the 
stitching indicated skilled 
hands - using pure silk 
thread, I £mcy. And there 
was die unmistakeablc 
effect of hand-pressing with 
the heavy gas-iron”. 

“So Chester Barrie 
showed their hand?** 

“Excellent, Y&tsin. Like 
n*. they have their 



. ' 



32 Savile Row London 



Financial Times Thursday May 21 1987 


- t*‘V; 

' *• t' 

The Funding 
of Political 

By Keith Ewing 

CUP : £19:50 

UP TO BOm is likely to be 
spent by Britain’s political 
parties daring the election 
campaign. This is small beer 
by US standards — about 
enough for a tight Senate 
race — but in Bri tish 

eye* to provoke a continuing 
debate about the influence of 
money on decOov. 

A common view is that the 
Tories have nn unfair edge; 
that they are able to raise 
vast amoonts of money which 

Is then used by Saatchl and 
Saatchi to win over floating 

The Tories certainly enjoy 
an adva ntag e, spending cen- 
trally nearly as nach as the 
other two parties combined 
ht the 1983 campaign, accord- 
ing to Hr Michael Pinto- 
Dnsehinflhy. a leading analyst 
of poOtlcal finance*. But 
daring the last campaign 
Tory support fen by four 
percentage points, as did 

Labour’s, while the rating of 
the Alliance, which was oot< 
spent twoto-one by the 
Tories, advanced by eight 

The answer, m Ivor Crewe, 
Professor of Government at 
Esse? University, has pointed 
eat, is that "in the absence 
of US-style trieviskm com- 
mercials (paid for by parties 
and banned in Britain), the 
Conservatives* financial 
superiority is largely gquan* 
dered on press and poster 
advertising, whose impact on 
the vote is nrinnsenle.” 

Wind mitten is the 
equality of time g i v e n to 
parties daring the campaign 
« news a nd current affairs 
programmes and on party 
election broadcasts, which 
cost relatively little. 

Money may be mote import- 
ant in the pre-election period. 
For instance, the Alliance’s 
concentration of resources on 

target seats paid-off in the 
May 7 local elections when It 
achieved above avenge 
increases in votes in those 

But if. nationally, money 
probably matters rather less 
than is commonly supposed, 
there are still questions about 
the present system. Should 
more be disclosed about 

sources of party finance and 

should there be a reduction in 
the reliance of the Tories and 
Labour on corpor a te dona- 
tions and trade onion affilia- 
tion fees respectively? 

Mr Keith Ewing, a Cam- 
bridge law don, believes the 
present system Is unfair. 
Writing from the perspective 
of a constitutional lawyer, be 
argues in The ponding of 
Political Parties ta Britain 
ffcnt “unlike many other 
Jurisdictions, Including the 
US and Canada, when cor- 
porations and trade onions 

an governed by identical 
rules, in Britain company 
poBtiea] donations am for all 
practical purposes unregu- 
lated by law, while trade 
union political expenditure is 
subject to detailed and re- 
strictive legislation.” There 
is not even the cheek of con- 
trols on central campaign 

Mr Ewing concludes that 
the system operates "dispro- 
portionately to the advantage 
of the Conservative Party." 
He notes that there are mini- 

ml requirements on com- 
panies to consult their 
shareholders and virtually 
none at all on parties to dis- 
close sources of funding. 

Consequently. Mr Ewing 
proposes full disclosure by 
the parties of the sources of 
their funds; the regulation of 
company donations to give 
shareholders and employees 

rights comparable to those 
enjoyed by trade union 
members; the extension of 
public funding to taetade 
direct grants to parties on an 
annual bads on a formula 
related to .votes cast in the 
previous general election; the 
extension of spending 
controls to the campaign 
expenditures of the political 
parties as well as their candi- 
dates; and perhaps subsidies 
to introduce greater balance 

in press views. 

This package. which 
matches much Labour Party 
thinking on the subject, is a 
mixed bag. There are strong 
arguments for greater disclo- 
sure and consultation, bat 
considerable objections of 
both principle and practica- 
lity to controls on campaign 
spending and press subsidies. 
A more Immediate priority is 
a ft dying- np of the law on 
spending toy national parties 

on locally targeted advertising 
and direct mail, as well as 

a lifting of the low maximum 
limits on local candidate 
spending. These average 
between £5£50 and £5,750 
and encourage " creative 
accounting ” especially in 

The issue of state tending 
is not cl ear cut. The principle 
that It is desirable to main- 
tain an effective opposition is 
already accepted since parties 
receive money for their par- 
liamentary operations. How- 
ever, grants based on votes 
east, as suggested by Mr 
Ewing and the Houghton in- 
quiry Into political finance in 
1976, are the wrong route 
Since they would not encour- 
age parties to broaden their 
bases by increasing member- 
ship or seeking individual 

A better answer might be 

the proposal of a Hansard' 
Society report in 1981 that, 
subject to a limited overall 
pool, the state should match 
individual donations up to a 
maximum of £2 a head. 

However, this argument, 
and some of Mr Ewing's 
worries, may be made out-of- 
date by the direct null revo- 
lution going on in British 
polities. The Social Demo- 
cratic Party and, to a lesser 
extent the Tories and Labour 
are now deriving a sizeable 
proportion of their funds 
from regular appeals to mem- 
bers and sympathisers as well 
as from "cold" shots to 
people on commercial mailing 
lists. This Is broadening the 
base of funding in a more 
democratic way and may 
make the parties less depen- 
dent on major institutional 

Peter Riddell 

Banks face 
the facts 

Anatole Kaletsky says Citicorp’s 
Third World debt decision 
is a potential watershed 

CoonMes with Recent Debt-Sewlcbig Problems 

(% of exports of goods and services) 

Total debt service 
Actual debt service payments 
Rescheduled debt sendee* 

IMF charges and repayments 
♦estimates; includes rescheduling of amortisation of some short-term 


























The background 

TUESDAY may have marfcwi 
the beginning of an entirely 
new— «nd possibly a final — 
chapter in the protracted Third 
World debt saga. 

Since 1982, hundreds of pro- 
posals have been put forward 
for alleviating the Third 
World's debt burden. But all 
of them have foundered on two 
principles, imposed by bankers 
and political authorities in the 
creditor countries. The first in- 
sisted that any re s tr u ct ur ing of 
the international debt nexus 
must impose no costs or losses 
on the banks. The second 
maintained that the traditional 
"case by case” approach to 
debt rescheduling, under IMF 
supervision, was both a neces- 
sary and sufficient condition to 
re-establish Third World coun- 
tries' creditworthiness • and, 
eventually, return them ■ to 
voluntary borrowing on the in- 

ternational markets. 

The historic significance of 
Citicorp's decision to provide 
for up to $3bn (£L8bn) In Third 
World credit losses is that it 
undercuts both principles. Thus 
It potentially removes what 
have become the most import- 
ant obstacles to any permanent 
resolution of the debt problem. 

Citicorp has not of course, 
simply given up on $3bn of the 
debts owed to it by Third 
World governments. Nor has it 
turned its bade on the system 
of debt rescheduling and new 
lending, which lias been 
orchestrated by the IMF since 
1982 and is being conducted 
now under the guise of the 
Baker Ban. 

' But what Mr John Heed, the 
bank's chairman, h*» done is to 
state explicitly that alternative 
approaches must be considered. 

even if they involve substantial 
credit losses to Citicorp and, by 
implication, to all the other 
international banks. "The debt 
problem will be with us into 
the 1990s and we see nothing in 
the global economy that would 
enable these countries to get 
out of their situation,” he said 
on Tuesday. 

“ We want to be in a position 
to trade out and reliquefy our 
loan portfolio. In the next two 
to three years we will engage in 
debt-equity swaps, debt sales 
and other approaches. The effect 
will be to take charges against 
the new reserves.” 

• Having thus rejected the 
principle that banks must not 
be forced to recognise any 
losses on their sovereign lend- 
tag. Mr Reed then went further. 
It was a misconception that 
losses an swaps or other types 
of debt conversions would neces- 
sarily mark a break in a 
country’s relationship with the 
international banking com- 
munity, or cot it off from new 
lending in die future. 

"A loss on a debt-equity swap 

would have no impact on our 
advancing new money to a 
country that adopted sound 
growth-oriented policies, 1 ' he 

Many bankers might describe 
such statements as nothing 
more t ban a recognition of 
business r mUt iti b anks in 
Europe and Japan have been 
establishing large reserves for 
years to cover the losses on 
debt sales, swaps and restruc- 
turings. But to the US banks, 
and Citicorp in particular, any 
public admission that losses 
might ultimately be recognised 
in debt restructuring has been 

The real significance of Citi- 
corp's action therefore lies not 
so much in the mm of money — 
equivalent to 20 per cent of its 
total Third World exposure — 
which has been set aside to 
meet possible loan losses; rather 
it lies in the new negotiating 
frameworks which can be 
established, taking as given the 
banks * ability and willingness 
to make sizeable concessions to 
the debtors. 

Among the approaches on 
which negotiations could now 
focus within the new structure 
are those which Ur Reed has 
explicitly commended: debt- 
equity swaps and secondary 
market trading in loans. The 
recent negotiations between the 
Philippines and its commercial 
bankers, in which the Govern- 
ment proposed converting part 
of its interest payments into 
equity-linked notes, could well 
be reopened in the coming 
months as a result of Citicorp’s 

But to make any real inroads 
into the debt problem, more 
radical devices will probably 
also need to be used. The most 
obvious, discussed for many 
years, is some form of securiti- 
sation of Third World lending 
with World Bank, IMF or West- 
ern government guarantees. 

While proposals for convert- 
ing Third World bank debts 
into longterm marketable bonds 
have previously been rejected 
as politically and fin»Tn»i*Uy un- 
realistic, this conclusion has 

been based on the assumption 
that the banks would not be 
prepared to take substantial 
loan losses in exchange for 
Western government or World 
Bank guarantees. That assump- 
tion has been invalidated. 

Bat are Western governments 
and banks really prepared to 
recognise the need to restruc- 
ture the whole Third World debt 
relationship and probably to 
make concessions to the debtor 
countries ? Or is Citicorp’s 
action merely an exercise in 
public relations and negotiating 
bluster ? 

The evidence from the world 
economy suggests that funda- 
mental reforms are likely to be 
necessary and bankers like Mr 
Reed are finally beginning to 
recognise it "The global eco- 
nomy is less robust today than 
was expected when the present 
approach was devised in 1982; 
trade figures in the debtor 
countries were less strong than 
we believed they would be,” Mr 
Reed said on Tuesday, giving 
the background for his decision 
to establish the new reserves. 

CITICORP’S decision to boost 
its loan loss reserves occurs 
against a backdrop of 
deteriorating creditworthi- 
ness in the Third World. 

The total debt of developing 
countries (to governments as 
well as banks) now exceeds a 
staggering $1 trillion. 

The debt has risen faster than 
the debtors’ exports of goods 
and services, meaning that 
their capacity to service it 
has deteriorated. According 
to recent IMF estimates, the 
ratio of debts to exports in 
countries with servicing diffi- 
culties rose to 302 per cent 
last year compared with 242 
per cent in 1982. 

IMF figures also illustrate the 
extent to which a succession 
of short-term rescheduling 
agreements has postponed 
rather than solved the under- 
lying problems. In 1986. re- 
scheduled debt service pay- 
ments amounted to almost 
half of actual debt service 
payments and were worth 
more than 20 per cent of 
debtors' annual exports. 

Their repayment problems have 
been exacerbated by a de- 
cline in commodity prices 
unparalleled since the Second 
World War. Prices have 
halved in real terms since 
the late 1970s and are at their 
lowest point since the 1930s. 

Debtors have also had to con- 
tend with sluggish growth in 
the industrialised world. The 
growth rate has halved since 
1984 and, at marginally above 
2 per cent a year, is well 
below the 3-3} per cent 
generally thought essential if 
the strongest debtors are to 
have a chance of trading 
their way out of difficulty. 

The drying up of new loans in 
recent years and the con- 
tinued obligation on the 

debtors to service the over- 
hang of old debt have resulted 
in an unprecedented transfer 

of resources from the poor 
south to the rich north. In 
1986, repayments on old debt 
exceeded new inflows by 
some S30bn. 

For Latin America, the negative 
animal net resource transfer 
since 1982 has been equiva- 
lent to about 4 per cent of 
gross national product (GNP) 
or a quarter of domestic 
savings. By contrast. West 
German reparation payments 
after the First World War 
were only about 2} per cent 
of GNP. 

Extraction of resources at this 
rate has undermined the 
debtors' long-term growth 
prospects because It has led 
to a collapse of investment. 
Per capita capital formation 
has declined by about 35 per 
cent since 1980, partly 
because Third World entre- 
preneurs fear that the returns 
on new projects will have to 
be heavily taxed. 

The combination of deteriorat- 
ing debt ratios and slowing 
growth in both the developed 
and developing world is 
forcing a reassessment of 
strategies to cope with the 
debt crisis. It seems highly 
likely that write-offs by the 
banks will in time be 
matched by explicit debt 
relief for the worst hit 

Citicorp has effectively 
declared that the true value 
of its Third World loans is 
much below their book value. 
The debtors will be tempted 
to agree and demand that 
their interest repayments be 
scaled down accordingly. 

Michael Prowse 

Not a free 




From Dr B. Hudson, 

Sir, — Your feat ure _ . 
"Banbury and north Oxford- 
shire — very model of self-help " 
(May 12) made very interesting 
reading. It claimed that Ban- 
bury was booming and about to 
boom even more aa it was 
" about to take advantage of Its 
natural geographic advantages. 
It then transpired that these 
asserted " natural ” advantages 
in fact were a product of * 
planned £250m public invest- 
ment programme fo new 
motorway connection*. What s 
"natural” about such public 
expenditure decisions? 
viously, the answer to this 
question is "nothing." They 
self-evidently reflect political 

In a way, however, this par- 
ticular case does no more than 
reflect a wider trend to attri- 
bute economic growth in the 
south east to a thriving entei* 
prise culture la a free market 
economy and its absence else- 
where to the absence of such an 
environment. Yet as t hccas e 
of Banbury shows, such grovrtn 
is heavier underpinned by 
public expenditure in (Inter- 
alia) transport infrastructure as 
the Government pours public 
money into airports and roads 
la the south east. Were such 
expenditures to be made in 
regions such as the north east, 
these too would no doubt 
experi ence boom conditions. In 
contrast, however, their fate is 
to suffer severe cuts in public 
expenditure as a result of 
policies towards industries such 
as coal, steel and shipbuilding. 

Seen in this perspective, the 
north-south divide owes a lot 
more to deliberate political 
cboices over public expenditure 
than it does to " natural ” loca- 
tional advantages working tb«r 
way through a freely competi- 
tive market economy. 

<Dr) R, Hudson, 

Science Laboratories. 

University of Durham , . . 

South Rood, Durham. 

Not wanting 
to work 

From Mr J. Rathtoell 
Sir, — Tbe figures quoted by 
Professor R. Layxrd and Mr A. 
Clark (May 19) are revealing, 
but draw me to a different con* 
elusion. In June 1979, some 21.6 
per cent of the population of 
working age (GB) were “not 
wanting to work." In April 1987, 
the percentage was approxi- 
mately the same, 213 per cent. 
What happened in between these 
dates was that work became 
harder to find, and it was easier 
to draw unemployment benefit 
without . running the risk of 
being found work. The restart 
programme and recent Govern* 
meat instructions to benefit 
offices appear to have restored 
the “ not wanting to wo;k " per- 

Letters to the Editor 

centage to its pre-Thatcher (and 
correct?) level. 

J. G. EothwelL 
Rothwell McGarva and Co. 

131 Old Birmingham Road, 
Bromsgrove , Wore*. 

Responsibility in 

From Mr K. Wallace 

Sir , — I have been finding it 
difficult to reconcile two recent 
Issues on the fiduciary invest- 
ments scene. 

First we have had David 
Walker, for the Bank of 
England, urging investors to 
take more interest in the com- 
panies in which they invest. 
Charges of abort term ism fill the 

Then we have financial ser- 
vice regulation — overdue 
perhaps-— but under the Act 
pension scheme trustees have 
to be “ authorised " in order to 
be able to take day to day deci- 
sions affecting their pension 
schemes Investments if they are 
not to he guilty of a c r i min a l 

No-one knows how many 
pension schemes are affected. 
Their numbers are certainly 
growing fast, as any pension 
professional will tell you. More 
and more scheme* are switching 
away from using life offices 
towards the "self administra- 
tion ” of their finances, and the 
threshold (ta tbe number of 
members) below which such a 
change makes economic sense 
is reducing all the time. Let 
us say there are 50.000 of them. 
As a group they own half tbe 
equities traded ta London. 

To be authorised under the 
Financial Services Act these 
pension schemes will have to 
become members of D4RO at a 
minimum cost of £1,500. Many 
—to judge from their response 
to a similar measure, the Data 
Protection Act— wm decline to 
do so and accept that an invest- 
ment questions for their 
scheme will have to be en- 
trusted exclusively to their in- 
vestment advisers. 

So what has happened, fit a 
stroke? 45,000 investors (say) 
will have been precluded from 
tfirfng .any stance on their 

The company secretary in 
Galashiels, the union official in 
Taunton or the foreman ta 
Wrexham may— in their fidu- 
ciary role as trustees of a pen; 
sion scheme— have strong and 
constructive views as to whether 
sacking this management or 
accepting or rejecting that 
opportunist bid will be in their 
own members’ best long term 
financial interest. 

But if they are tempted to 
give expression to their opinion, 
they will be sharply told that 
by statute "day ta day” deci- 

sions are for their appointed 
investment managers alone. 

.In consequence the modify- 
ing influence on a frothy market 
of large numbers of dispas- 
sionate and responsible In- 
vestors— unconnected with City 
interests— but owning half of 
all equities, will be lost 
Short termism will not be dis- 
couraged. Investor responsi- 
bility will be eroded. 

Keith Wallace. 

Richard* Butler. 

5, Clifton St, EC2. 



From Mr G. Simon 
Sir,— In writing about the 
Tesco/HiQards takeover (May 
16) Lex commented that 
although it was understandable 
that roe chairman of H illards 
was upset about tile behaviour 
of the institutions "the indus- 
trial logic of Tesco’s bid was 

In the same issue however 
Anthony Harris reviewed the 
study made by Professor Colin 
Meyer, the Price Waterhouse 
professor of corporate finance 
at the City University. This 
study dwells on tbe behaviour 
of Japanese institutions which 
is entirely different from that 
of the UK institutions. The 
Japanese institutions seem to 
offer a committed and sup- 
portive long term relationship 
whereas the Pro in its recent 
annual report makes it (dear 
that "at some price a bid can 
be too attractive for us 
properly to reject it.” 

It would be interesting to 
know what Lex t hink s of this 
contrasting behaviour. 

G- H. Simon. 

Honor House, 

Aston Magna, 

Nr Moreton4nJlanh. 


Exchange rate 

From Mr D. Dole 
Sir,— Mr Grantham (May 11) 
makes valid points about the 
management of our exchange 
rate since 1979 and seeks 
political revenge. Mr Grey 
(May 13) would he satisfied 
with some political penance and 

r mise to join the EMS. 
am concerned that we 
understand - the effects of 
changes in the exchange rate 
and avoid a cure that would 
be worse than the disease. The 
pound must move over time to 
reflect the relative changes in 
our performance as a producer 
of goods an fl services when 
compared with other countries. 
It is because this did not 
happen that the pound was 
over-valued and we suffered the 
dire consequences listed by Mr 

Grantham. Even the mighty 
dollar has ta the end fallen, ta 
recognition of the vast im- 
balance of US foreign trade. 
This Should have happened 
much sooner, but is the only 
way in which the exchange 
market can help the US to pull 
back to sound business — by 
making her exports cheaper 
and imports dearer. 

If the British economy fails 
to compete, the pound must 
fall further to preserve our 
industry and employment This 
purifying action by tbe market 
would be severely hindered if 
we joined the RMS. 

Unfortunately much of the 
dealing in currencies is for 
quick profit and is unrelated 
to the market's function ta 
foreign trade. This "hot money" 
floods across frontiers and 
causes greatly exaggerated 
swings in currency values. In- 
sofar as the EMS acts as a 
- damper to reduce short-term 
fluctuations, it is doing a useful 
job. What is really needed is 
the imposition of friction 
against violent short-term move- 
ments without preventing neces- 
sary long-term adjustments. 
This effect could be produced 
by something like a heavy 
stamp dnty on short-term deal- 

Until we have such an Inter- 
nationa] control system, we 
must jealously ■ guard our 
freedom of action to manage 
our own exchange rata, and 
keep clear of the EMS. 

Douglas H. Dale. 

97 HUderstone Rood, 

Meir Heath, Stoke-on-Trent 



From Mr R. Waddingham 

Sir,— The secretary of tbe 
Association of Consulting Actu- 
aries (May 16) misunderstands 
the nature of the independence 
of tire advice given by actuaries. 
All consulting actuaries, whether 
they rent their working capital 
from their bankers or from 
shareholders, are responsible to 
the Institute of Actuaries. Their 
debt is to their profession. 

It cannot be sensible that the 
ACA now represents only half 
of the UK's consulting actuaries. 

In particular the four largest 
(fama of international consulting 
actuaries are excluded. 

The ACA would best regain 
its strength if it moved in step 
with tbe institute. The Inter- 
national Association of Consult- 
ing Actuaries, in which ACA 
members play as active part, 
has long since abolished the 
distinction between employed 
and self-employed actuaries. 

At a when liaison with 
government departments on 
pension matters has never been 
so important, how much better 
for clients if all consulting 
actuaries would pull together. 
Until then, the majority of 
employers will receive actuarial 
advice from non-members of 
the ACA. 

R. A. J. Wad d tag h a m . 

2 Long Fork, 

Chesham Bois, Bucks. 

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US ‘asked Saudis to intercept’ 

US OFFICIALS asked that Saudi 
Arabian fighters intercept the Iraqi 
aircraft which attacked the US war- 
ship, the Stark, on Sunday, but the 
Saudi ground controller did not 
have authority to follow the re- 
quest, the White House said yester- 

Mr Marlin F i t z w a ter. the White 
House spokesman, said that, before 
authority had been received, the 
Iraq aircraft had returned to base. 

Mr Fitzwater said two Saudi F- 
15s had scrambled from Dahrein 
just before the missile attack by an 
Iraqi Mirage jet, on orders to fly a 
combat patrol mission over the Sau- 
di coast 

Once it was clear that the Stark 
had been attacked, a US Awacs 
(Airborne Warning and Control 
System) aircraft and the Saudi con- 
troller aboard asked the Saudi sec- 

tor command centre at Dahrein for 
authority to order the Saudi F-15s 
to intercept the Iraqi F-l Mirage 
with the intention of forcing it down 
on Saudi territory, he said. 

The Saudi chief controller on the 
ground advised that he did not have 
authority to order such action and 
immediately sought approval from 
higher authority. Before such ap- 
proval could be obtained the Iraqi 
aircraft was well on its way back to 
its base,” Mr Fitzwater said. 

Thirty-seven US crewmen died in 
the attack, and their bodies are 
being returned to the US for burial. 
The Stark is tied up in Bahrain, and 
an assessment of damage is un- 
der way. 

The strike on the Stark was the 
first attack on a US warship in the 
Gulf since the Iran-Iraq war erup- 
ted in September 1980. 

More than 300 ships, mostly tan- 
kers, have been hit by both Iran 
and Iraq in the Gulf this year. 

The so-called tanker war broke 
out three years ago as Iraq sought 
to cut off Iran's oil exports, vital to 
Tehran to finance its war machine. 

Iran recently has stepped up at- 
tacks on vessels associated with 
Kuwait in retaliation for the sup- 
port given to Iraq by the northern 
Gulf emirate. 

The Stark’s captain was yester- 
day asked whether his ship had 
previous radio contact with the bel- 
ligerents in the Gulf war. 

He said Stark had spent most of 
its time in the southern Gulf, where 
they had frequent radio contact 
with Iranian aircraft. The Iranians 
had always responded to radio chal- 
lenges and stayed out of the general 
vicinity of the warship. 

Meanwhile in London Mr Lev 
Mendelevich, head of the Soviet 
Foreign Ministry’s evaluation and 
planning directorate, repeated So- 
viet warnings that the US naval 
presence in the Gulf was liable to 
lead to unpredictable events such 
as the attack on the Stark. 

Mr M endelevich called the seven- 
year-old Gulf conflict a senseless 
.war which neither side could win. 

Mr Mendelevich, visitin g TanHrw 
for talks with British Foreign Office 
officials, said the attack on the 
Stark was "very dangerous and 
very unfortunate.” 

"We always warned the Ameri- 
cans that the increase of their mili- 
tary and their navy in the Persian 
Gulf could be detrimental to peace, 
because many unexpected events 
might occur,” he said. Barter 

and Grace 
in cocoa 
link talks 

By Stefan Wagstyl In London 

S&W BERISFORD, the British food 
and commodity trading group, and 
W. R. Grace, the US conglomerate, 
are discussing merging their cocoa- 
processing interests. 

The deal would create one of the 
largest groups in the world in a 
fragmented industry which is un- 
dergoing rapid consolidation. 

The processors, which turn cocoa 
beans into cocoa butter (for choco- 
late) and cocoa powder (for drinks 
and other uses), have been under 
increasing pressure from their 
main customers, the large interna- 
tional chocolate companies, led by 
Mars of the US and Nestle of Swit- 

The chocolate companies, which 
have been growing through acquisi- 
tion in the 1980s, have been able to 
squeeze better terms from the pro- 
cessors while competition among 
processors has increased because 
cocoa-exporting countries in West 
Africa and elsewhere have been in- 
stalling plants of their own and co- 
coa consumption has been rising 
only modestly. 

Berisford and Grace together 
own five plants with a total capacity 
of some 180,000 tonnes, 10 per cent 
of the cocoa processed last year, 

Berisford owns factories in the 
Netherlands and West Germany 
and Grace in the Netherlands, Sin- 
gapore and the US. 

Both companies said the talks 
about a possible "combination” 
were at an early stage and declined 
to discuss details. Berisford said the 
moves were in their "common inter- 

They would not say who would 
control the merged cocoa busines- 

Cocoa market analysts said that 
the move looked like a defensive 
reaction to the power of the choco- 
late companies, which had not only 
grown in size, but had also in- 
creased their in-house processing 
capacity by buying independent 

Cocoa-processing accounts for a 
small (and unstated) part of each 
group’s profits. 

Berisford, which saw profits rise 
180 per cent last year to £148m 
($249m). recently had its proposed 
sale of British Sugar, its sugar ref- 
iner, to Ferruzzi, the Italian food 
group, blocked by the British Gov- 
ernment on monopoly grounds. It is 
considering ways of cutting its 
CSOflm defat, nearly 50 per cent larg- 
er than shareholders' funds. 

Grace is selling assets accounting 
for nearly half its S8.8bn 1988 turn- 
over in order to concentrate on its 
core businesses of chemicals and 
natural resources. 

Commodities, Page 38 

Sabena pursues link with SAS 


THE much mooted merger between 
Sabena and Scandinavian Airlines 
System (SAS) came a step closer 
yesterday when the Belgian nation- 
al airline confirmed that it was ac- 
tively pursuing the link. 

Sabena said that its board of di- 
rectors had "given file go-ahead for 
the eventual creation of a new air- 
line based on the integration of the 
airline activity of both Sabena and 

It added that "this does not in- 
clude any other related activity" 
such as Sabena's hotels and cater- 
ing operation. 

Talks have been going on behind 

the scenes for many months, and al- 
though there have been some politi- 
cal reservations in the Scandinav- 
ian countries, the SAS management 
has already expressed its enthu- 
siasm for such a deal The co-opera- 
tion agreement is thought likely to 
include not only joint operations 
but the joint procurement of new 

The negotiations come at a time 
when European airlines are in- 
creasingly faring up to the chal- 
lenge provided by greater liberali- 
sation of air transport Many indus- 
try experts feel that larger group- 
ings will be best placed to prosper 

in the new competitive environ- 

Sabena, winch is more than 50 
per cent owned by the Belgian Gov- 
ernment, has not yet disclosed its 
detailed results for 1988, but the 
pressures were evident from a 
statement in February. The compa- 
ny said that it had remained in 
profit in 1988 despite a downturn in 
traffic on the North Atlantic and a 
temporary loss of landing rights in 
Zaire, Belgium’s former colony. 

Yesterday’s statement from Sabe- 
na rules out earlier suggestions that 
the merger might indude non-air- 
line activities such as hotels and ca- 

Fijian troops quell violence 


FLITS Governor General used 
emergency powers invoked after 
last Thursday’s coup to order troops 
to quell ugly outbreaks of racial vio- 
lence yesterday as the formation of 
an interim government was unex- 
pectedly delayed. 

The delay meant another day of 
fitful uncertainty for the South Pa- 
cific island state, which has been 
rocked by military intervention and 
its aftermath. 

With the unprecedented violence 
exposing deep tensions between the 
ethnic Melanesian Fijians and the 
Indian community, concern over Fi- 
ji's fragility is intense both at home 
and abroad. 

Ratu Sir Penaia Ganilau, the 
Governor General, urged people to 
“be calm and be patient" Lt Col Si- 
tiveni Rabuka, who appears to re- 
tain a key position after leading the 
coup, also appealed for a halt to file . 

The great Council of Chiefs, file 
most Influential Melanesian body 
in Fiji, meanwhile adjourned its 
crucial meeting for a second day af- 
ter discussing the Governor Gen- 
eral’s phased plan for a return to 

The plan was unveiled on Tues- 

day in the wake of Lt Col Rabuka’s 
acceptance that executive authority 
lay with the Governor GeneraL 

It hs for a dissolution of parfia- 
ment and fresh elections with a 
Council of Advisers to help in the 
interim and to fwwMw constitu- 
tional changes. 

Yesterday Dr Timoci Bavadra, 
file deposed Prime Minister, who 
was released from detention on 
Tuesday night, met the Governor 
General and withdrew his initial 
challenge to the plan. 

He said he had “rethought” and 
now wished to take a conciliatory 
approach. His supporters in d icated 
he would keep a low profile pending 

Appointments to the Council of 
Advisers are now likely today, after 
the Governor General, himself a 
has attended file Council at 
Chiefs meeting, heard its resolution 
imri explained its plans. 

Yesterday’s delay underlined con- 
cern that many chiefs are resisting 
the Governor General's plans, even 
though F ijians s tand to gain more 
than Indians from its provisions. 
Either way, today’s session of the 
r oiiTM-fl is critical. 

As the council met in Suva, a 

rampaging gang of Fijians took to 
file streets, intimidating the public, 
beating up Indians, smashing car 
windows and threatening foreign 

The police and army interv e n ed, 
but the action prompted the closure 
of shops and banks, stopped Indi- 
ans gathering for a pro-Bavadra ral- 
ly and silenced the city. 

There was another n u t hm aV fn 
the afternoon as a large group of Fi- 
jians roamed the streets. Reports of 
trouble in other parts of the country 
were hazy although it is known that 
many bank branches did not open. 

The violence underscores the 
Governor GeneraTs dependence on 
the armed forces and the need for 
him to establish a clear line of au- 

Reacting to the violence, the Brit- 
ish High Commission urged mem- 
bers of the local British community 
to stay indoors if civil disorder 
broke out and reminded people of 
other precautionary measures. 

The New Zealand Government 
dispatched a second frigate to Fiji 
and indicated that New Zealanders 
should prepare to leave Fiji The 
Australian Government stood fay to 
take out 4^000 of its nationals. 

Contra chief details Saudi aid 


MR ADOLFO CALERO, the former 
Coca-Cola plant manager turned 
Nicaraguan Contra rebel leader, ap- 
peared yesterday before the Iraot- 
gate hearings on Capitol Hill and 
described himsglf as a "knight in 
democratic armour ” 

But Mr Calero was more a Cru- 
sader unhorsed as he faced a bar- 
rage of questions about his personal 
finan ces and his rebel movement, 
the FDN, whose troops number 
around 15,000 and are based in nor- 
thern Central America. 

In his testimony Mr Calero made 
clear that he was almost totally re- 
liant on Saudi Arabia to fond bis 
troops file Congressional 

ban on official US military aid be- 
tween the summer of 1884 and Oc- 
tober 1988. The Saudis provided 
532m out of total contributions to 
the FDN of 533.8m. He also made 
clear that he was very dependent 
on the sacked White House aide, Lt 
Col Oliver North. He said be had 

"full confidence” in Lt Col North 
a rd told him everything during 50 
meetings over the period of the 
Congressional ban. 

Mr Calero', who was jailed in 1978 
for his opposition to the former dic- 
tator President Somoza, disclosed 
that he had given around £90,000 to 
U Col North in the spring of 1985. 
The money - part of the Contras 
funds -was to be used to help free 
American hostages held in Leba- 
non. , 

He was asked why he and Lt Col 
North dealt in travellers cheques. 
"Well,” he explained, "it was much 
easier, and there was less commis- 
sion to pay.” But Senator Howell 
Heflin, the Democrat fro m Alaba- 
ma and former federal judge, point- 
ed out that Mr Calero had taken out 
some S3m in travellers cheques. 
"This raised questions that corrup- 
tion could have taken place,” he 

Mr Calero said he had "truck- 

loads of invoices" in Central Ameri- 
ca. His counsel intervened and said 
that the committee could look at all 
the invoices and that offer had 
stood since last February. 

In the Senate caucus room, a 
large board containing boxed dia- 
grams on the PON’s accounting pro- 
cedure provided a hand guide. Of 
S33.6m received, some S19m was 
spent on arms some from Eastern 
Europe, some S14m went on non4e- 
thal aid such as jungle boots, food, 
medicine and uniforms. But some 
$5J5m is still unaccounted for. 

Despite the occasional humour- 
ous aside, Mr Calero raised some 
important issues in his opening 
statement “What is really on the 
scale," be said of the Contras fight 
against the Sandinista Government 
in Nicaragua, "is American resolve 
to stand by its friend, principles 
and polities." 

S umlinklM l an n rl | gffairlr | 

Page 4 

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South African explosion 
kills three policemen 

Continued from Page 1 

"Afrikaners are not a mere mi- 
nority group but a separate commu- 
nity that is entitled to full political 
self-determination and will never 
be satisfied with anything less,” he 

Earlier, Mr Connie Mulder, who 
was expelled from Parliament in 
1979 afto* allegedly lying about the 
illegal use of government funds to 
finance a secret propaganda effort, 
told foreign correspondents that the 
Conservative Party intended to 
abolish South Africa as presently 

In its place it would create 13 sep- 

arate nation states. One of these, 
possibly to be called Southland or 
the Free State, would be a state 
where only whites enjoyed political 

This white state would deal with 
other black nations like the Xhosas 
and the Zulus as one sovereign 
state to another, as' Britain dealt 
with France or Germany in the Eu- 
ropean Community, he said. 

Black workers would have no po- 
litical or trade union rights in the 
white state and would never be 
granted titizenship* he said. 

shares rise 
in hectic 

By Richard Tomkins in London 

MORE THAN HALF the shares in 
Rolls-Royce, the newly privatised 

Bri tish ngim» ma ker , i-hnng w! 

m hectic first -day dealings 
yesterday as small investors rushed 
to take profits on the issue. 

The shares, offered at a partly 
paid price of 85p each, opened at 
128ftp and gradually moved up dar- 
ing toe day to dose at a peak of 
147p, representing a premium of 
62p - or 73 per cent - to the offer 

Observers were surprised fay the 
of tine premium on an i ss ue 
which was originally regarded as 
tightly priced. Comparisons with 
British Aerospace had Jed many 
Gty of London analysts to forecast 
a premium of 30p - 35p- However, 
the “grey” (unofficial) market price 
of 138ftp on Monday afternoon 
proved a fairly reliable indicator. 

The buying interest was said to 
have come partly from UK institu- 
tional investors, who had earlier 
had their portion of file offer cat 
back from 60 per cent to 50 per cent 
hp/rancp nf heavy p uhlte demand for 

the shares and partly from overseas 
investors, particularly in Japan. 

Turnover at the end of the day 
was more 420m shares com- 
pared with the 801m offered for 
sale. Since 50 per cent of the issue 
had been placed with the institu- 
tional investors, it was dear that 
public applicants were responsible 
for a high proportion of the selling. 

The volume of traded options in 
Rolls-Royce shares helped produce 
anew record for the London traded 
options market The 49,138 Rolls- 
Royce contracts took the market's 
total for the day to 116495 com- 
pared with 101214 cm May 1L 
The heavy trading in HoUs-Hoyce 
shares put further strains an the 
settlement departments of stock- 
brokers’ offices, which have come 
under pressure because of re cen t 
big increases in trading levels. 

The pressure is expected to con- 
tinue today as more applicants re- 
ceive their allotment letters and de- 
cide to cash in on the large prem- 

The pattern of trading contrasted 
with other recent privatisation is- 
sues in which shares have gone to 
high initial premiums and eased 
bade during the first day. British 
Airways opened at an 82 per cent 
premium, British Gas at 34 per cent 
and TSB (not technically a privati- 
sation) at 100 per cent 

Foreign investors are limited to a 
ywoTimuwi total holding of 15 per 
cent of Rolls-Royce's shares. So a 
question mark Hungs over how long 
their buying interest will persist to- 

Shares fall 
in nervous 

Continued from Page 1 

ry bill rates late an Tuesday at the 
same time as bank Eurodollar de- 
posits rose by % point Bill rates 
then steadied yesterday. 

With bank stocks falling, prices 
for US bank issues of Eurodollar 
floating rate notes fell by as much 
as 2J> per cent yesterday, before 
staging a partial recovery in the 
late afternoon. 

One of Citicorp's own issues, mat- 
uring in 2011, was quoted around 
93% yesterday afternoon, compared 
with a price of over 95 at Tuesday's 
dose. British bank issues foil by as 
much as Half a point. 

Reflecting concern about the Cit- 
icorp move, major London dealers 
agreed to a substantial widening of 
the margins at which they were 
prepared to deal in US bank issues. 
Dealing spreads broadened to 
much as ft percentage point for 
longer-maturity notes, compared 
with 0.1 per cent on Tuesday. 

Prices for perpetual floating rate 
notes, which have been recovering 
steadily since a market debacle in 
February, also fell by up to 2 per 
cent These notes, issued by banks 
to bolster capital, have no final mat- 

In early European trading yester- 
day, dealers marked down prices 
for fixed-rate dollar bonds. Dollar 
Eurobonds were quotes up to 1ft 
points lower initially, but a steady- 
ing of the Treasury bond market in 
the US and a steadier dollar helped 
calm market jitters by lab* in the 

On European currency markets, 
the dollar dosed at DM L7745, be- 
low Tuesday’s closing DM 1.7780 
but above its low yesterday of DM 
1.7670. It dosed at Y139.B0 com- 
pared with the previous dose of 
Y140.00 and yesterday's early low of 


Only the rich 
can play 

Friends of Citicorp see its bold 
strengthening of reserves against 
sovereign debt as more than a way 
to protect its own future profitabili- 
ty; the hope is that by reversing its 
long-term policy of under-reserving, 
Citicorp may also have set the stage 
for a constructive new approach to 
the entire debt problem. The 
bounce in Citicorp's own stock yes- 
terday, when some other bank 
shares were tottering under the 
news, suggests that Qticorp is not 
as short of friends as its chronic im- 
derperfonnance might suggest 

Few of those friends are likely to 
be found in other banks, however, 
where Citicorp's demarche is more 
likely to be regarded as an outsize 
piece of cosmetic -self -indulgence 
than a great stride towards the re- 
construction of Third World debt 
Even in the US, where banks can 
still treat loan toss reserves as pri- 
mary Mi pifal, fi lOW hwilni that are 
most deeply enmeshed in non-ac- 
exiling sovereign loans are the least 
aMe to follow Citicorp's lead. Manu- 
facturers Hanover stock was not a 
strong market yesterday. 

In London, where such provisions 
come straight out of shareholders’ 
equity, bank shares were a sea of 
red ink. Without attempting any 
spurious precision, it was easy for 
all the City of London to see that 
fiie unfortunate Midland could 
stand to lose well over a year's 
earnings from the adoption of Citi- 
corp criteria; that faihous rights is- 
sue, so dose to the front of the 
queue when the shore price went 
through £7 fiie day before yester- 
day, has once more been ***** to 
look awfully diluting. 

The gradualist school of resched- 
ules wiH take some convincing that 
Citicorp has dime anything more 
than start a downward spiral in 
which loans are marked to a dis- 
count, b o rro w ers turn nasty about 
paying even the reduced Interest, 
and so an. But at least fiie threat of 
an interbank run on the most un- 
dercapitalised banks has not, as 
yet, been realised. 


The recent government offers for 
sale have a distinct pattern. A price 
is set which, everyone, even those 
not involved in the issue, seems to 
agree is full and fair. Then the 
shares reach a terrific premium by 
fiie end of the first day's trading - 
73 per cent in the case of the BoUs- 

1884 1888 SM Vt 

Boyce partly paid stock — and ev- 
eryone agrees that the new higher 
price is right 

The rapid rise in fiie stock mar- 
ket from the time the price was 
struck to the moment of first deal- 
ings cannot be the main reason for 
the scale oE the premium. If the ven- 
dors had indexed the part-paid offer 
price to the movement in the mar- 
ket, it would now be at 67p, instead 
of fiie actual market dose of 147p - 
at which price Rolls-Royce is on a 
prospective multiple of 12, cm a xero 
tareharge much in line with the 

British Aerospace ranking. 

Yesterday fiie Japanese were 
buying in force. They apparently 
like fiie fact that the US investor 
cannot buy for 90 days while there 
is a 15 per cent limit on foreign 
ownership of the shares. To be at 
the frost of that queue the Japa- 
nese will need to be on the register, 
and for that they must have title to 
the shares fully paid. It so happens 
that the prospectus makes provi- 
sion for early payment of Septem- 
ber’s second instalment So in ex- 
change for tying up some more cap- 
ital, the Far Eastern i n v estors may 
be abteto crowd the Americans out 
of the stock altogether. 


Yesterday was not a good one for 
companies to draw attention to 
themselves, and both Bass and 
Whitbread shares fell faster than 
the market Bass, whose interims 
gave bttie cause for disappoint- 
ment, got off the lighter of the two, 
the shares falling 3ft per cent But 
Whitbread, in any case the less pop- 
ular share, dropped nearly 5ft per 
cent after revesting only a 7.2 per 

cent gain in earnings per share. 
Though the market is in a bit of a 
state, it has not got quite so far as to 
prefer the KxaQed defeiwtve 
slocks to the taster growing, riskier 

Neither company produced great 
excitement in its brewing business 
though each claimed a market 
share and could boast higher mar- 
gins. The effect of even a tittle extra 

volume is such that a good summer 
on top of a favourable budget ought 
to be interesting. But brewing does 
not inspire much hope for even av- 
erage earnings growth. For that the 
brewers’ efforts at trend-spotting 
must succeed. While Whitbread's 
voting structure may award it the 
luxury of a long-term view, its 
wines *»d spirits investment in the 
US, already in the medium-term, 
has still to prove ftseffi It can be 
more enthusiastic about its retail- 
ing arm - which has the attraction 
of taking Whitbread into geographi- 
cal parts not reached by its beer. 
And Bass’s smaller leisure side is 
growing even faster. The brewers' 
discount, however, does not look 
like dosing yet 


For those who have been puzzled 
(rather than merely dazzled) by 
Coloroll’s rate of growth, the compa- 
ny yesterday turned its presenta- 
tion fot o something »kin to a reviv- 
alist meeting. It certainly communi- 
cated the aggresson which has pro- 
pelled the capitalisation from £50m 
to E350m in under a year. 

While there is a danger that fiie 
surrounding applause may become 
too loud, there is no doubting the 
management's skill or the imagina- 
tion with which it has carved out 
the "home fashion” niche. Also, 
while the highly rated paper has 
helped in the buying of earnings, 
there has been plenty of organic 
growth, most notably in wallcover- 
ings, and the acquisitions have re- 
mained sensibly focused. However, 
Coloroll cannot escape the acquisi- 
tion fr w M fa rih if it is to sustain 20 
per oent earnings growth a year. 
And even if it regularly doubles 
margins, there will be a limit to the 
new paper the market will bear, es- 
pecially as the acquisitions are be- 
coming increasingly expensive. 
That makes an early sale of the 
Crown Bouse engineering division 
crucial if file balance sheet is to be 
freed for a cash buy. 






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Thursday May 21. 1987 



f: Airlines, car hire 

companies, hotels and 
^ many^hers^ic|£arc^ 
all competingfierceiyto 

— — make life; more 

comfortable for the executive on 
busings trips. The reason, David 
Churchill explains, is that providing 
these services is now very big business 

The executive 
calls the tune 

much in demand. Unlike their 
counterparts Who travel on holi- 
day, business travellers offer 
the airlines, hotels, car rental 
companies, and credit card 
operators a source of income 
that is growing steadily and is 
generally more consistent than 
the packaged holiday business. 

Recognising their import- 
ance, therefore, the business 
travel industry is now deter- 
minedly wooing the business 
traveller to a degree for greater 
than ever before. 

A decade ago, for example, 
separate accommodation for 
business travellers— away from 
the tourists and their annoying 
children — was almost unheard 
o£ Now, it is the ' executives 
travelling business or first class 
who provide the cream on the 
profits for airlines and who are 
being wooed by such tactics as 
British Caledonian's? -door-to- 
door limousine -service or 
Cathay Pacific’s top-rated 
Marco Polo- service, considered 
one of the best even by the high 
standards of Far Eastern car- 

Hotels, moreover, who used to 
consider the? . independent 
traveller as. their most yalaed. 
customers have now faced the 
reality ofhayijjgbetweentwo- 
thlrds and-? three-quarters of 

their rooms filled on average 
each week . by business 

Now it is the business 
traveller who gets ' the express 
. check-out afterbreakfast rather, 
than waiting in long lines to pay 
his bill. It is the frequent busi- 
ness traveller, moreover, whom 
hotels now try to tempt back 
-again and again thr ou gh 
schemes such as Hyatts Gold 
Passport. This not only gives the 
business traveller extra' ser- 
vices when staying in a Hyatt 
hotel, but also qualifies him for 
free holiday accommodation 
with his fomily. 

- It is not just the international 
traveller who is being wooed. 
British Rail, for example, has 
.been courtin g the business 
traveller— who tends BT pay 
closer to the stated ticket price 
for inter-cit? journeys than most 
private ' passengers— with a 
range of services, such as execu- 
tive lounges and mobile phones 
available on trains. 

The reason- for this assiduous 
courting, of . the business 
traveller is simply the. sheer 
size of expenditure on business 
travel in all its .forms. .The exact 
amount spent is difficult to 
quantify^— given the difficult ies 
of knowing exactly what to 
include— but several •' attempts 
have' been made. .. .... 

Business Travel 

American Express which has 
a vested interest in knowing 
how much is being spent on 
business travel, carried out a 
major survey two years ago 
which put the total size of the 
market at £17.4bn. The company 
said yesterday that it did not 
believe this figure had altered 
significantly since then. 

American Express's calcula- 
tions suggested that &L3bn each 
was spent on air fores and pet- 
rol, £A2bn on accommodation 
and subsistence, £2-5bn on rail 
and car hire, and £2.1bn on 

These figures have been criti- 
cised in some quarters for being 
either too conservative or. too 
high. But all agree that the mar- 

ket is a huge one. 

Which is the key reason why 
the UK travel trade became so 
worried last year when it looked 
as if tears of terrorism would 
keep the imported US business 
traveller away from the UK. 

In spite of the slump of up to 
40 per cent in visitors from 
North America In the weeks 
immediately after the US bom- 
bing of Libya, the market had 
recovered well by the end of the 
year. Although a number of US 
visitors to UK conferences and 
exhibitions were lost, many 
individual business travellers 
were undeterred by the terror- 
ism fears and more worried 
about losing business by not 
coming to Europe. 

Even so, the Horwath & Hor- 
wath hotel industry analysts 
report that the average 
occupancy for. UK hotels last 
year was some 3 per cent down 
on the 1985 level, with London 
hotels 7 per cent down. 
However, Mr Jonathan Bodlen- 
der, Horwath & Horwath’s man-’ 
aging director believes that “the 
average room occupancy rate 
this year is likely to recover, 
barring any major economic 
down-turn or resumption of 
terrorist activities. ’* 

The ■ • UK conference and 
exhibition industry is particu- 
larly concerned that nothing 
happens to keep the US busi- 
ness travellers away this year. 
The buoyant demand for confer^ 

Controlling costs: the expense cycle Incentive travel: more rewards for 

ence and exhibition facilities in 
the 1980s has prompted the 
industry to invest heavily in new 
facilities, with more on the way. 
Work has started, for example, 
on the new £107 nj Birmingham 
International Convention 

Mr David Barrow, business 
travel manager for the British 
Tourist Authority, believes that 
conferences and exhibitions 
will “become a billion pound 
business by 1990.” He warns, 
however, that the industry is 
becoming extremely competi- 
tive. “In the 1990s competition 
will be even fiercer as overseas 
visitors will be able to choose 
from a number of international 
shows in their own specialist 

has to be tackled 

Travel agents: fierce competition for 
the best deals 2 

AlrUnes: aiming for a better class 
Air charter: taxi services improve 3 

Rail: smoother rides for executives 
Car rental: building up on loyalty 5 

Travelling spouses: incentives to 
bring a partner 

Women executives: hotels provide 
discreet security 6 

Hotels: the comforts grow grander 7 


He urges airlines, hotels, and 
convention bureaux to work 
together to promote this facet of 
the whole business travel 

Although business travel has 
come to dominate the thoughts 
of the travel trade in the 1980s, 
it is still being given less atten- 
tion by companies. 

Mr Christopher Rodrigues, 
managing director of American 
Express's travel and entertain- 
ment management division, 
believes that many companies 
“still have to grasp the nettle of 
managing their business travel 

He points out that “ it is not 
enough to decide what class of 
rail or travel an executive can 
use. Professional travel 
management includes the 
management of cash advances 
and developing specific 
management information 

His view is echoed by Mr Tony 
Grimshaw, managing director of 
Swan National Rentals who says 
that “many companies have an 
undisciplined and unstructured 
approach to travel, even though 
they are aware of the large 
amounts spent on business 

Mintel, the market research 
company, has carried out a sur- 
vey of travel managers in UK 
companies which found that 
many companies paid lip-ser- 
vice to travel management Six 
out of every 10 surveyed 
claimed to have a written busi- 
ness travel policy. The survey 
also revealed that while the 
majority of companies handled 
hotel and car hire bookings in- 
house, only one in 10 booked 
airline seats themselves. 

This is partly a reflection of 
the relatively late attention 
paid to business travel by travel 
agents. In the 1970s, agents 
handled business travel in a 
very off-band way; now it is the 
fastest growing part of the travel 
trade. Thomas Cook, which is 
the leading agent hand! ing busi- 
ness travel, has some 6,000 busi- 
ness clients working through 79 
specialist business travel 

As travel agents become more 
attuned to the business needs of 
companies, then more efficient 
control of the whole business 
travel operation is likely. One 

corporate life S 

Conference* and ra hB it t fon a : London 

attracts big spenders 

Provincial centres seek the long-stay 

executives 9 

Executive tieaWi: guarding against 

the risks 

Gadgets: guide to handy 

accessories 10 

The US: Europeans seize their 
opportunities 11 

Paying the Mils: plastic cants are 
doing nicely 12 

trend expected to continue is 
the policy of agents setting up 
operations within the offices of 
major client companies; Tho- 
mas Cook, for example, has 47 
such inplanis within companies. 

While companies may be get- 
ting more professional in their 
handling of business travel, Lhe 
industry itself is concerned at 
the rate of future growth in 
demand for its services. 

The biggest worry is the fear 
of a world trade war breaking 
out between the US, Japan, and 
Europe which could lead to a 
world recession and a conse- 
quent slump in demand for air- 
line and hotel services. 

Even if no trade war material- 
ises, a key foctor determining 
where business travel growth is 
likely to be fastest is the 
exchange rates in different 
parts of the world. “ To trans- 
late favourable terms of trade 
into actual trade involves incur- 
ring high travel costs— a diffi- 
cult psychological step to take 
when one's own currency is 
depreciating but one which, 
nevertheless, has to be made.” 
points out Mr Robert Cleverdon. 
author of the comprehensive 
report on International busi- 
ness travel published by the 
Economist Intelligence Unit. 

The international hotel indus- 
try bas clear views on where the 
growth is to be found over the 
next decade: Europe and the 
US. Major hotel chains — such as 
Regent International and the 
Mandarin Oriental Hotel 
Group — are eagerly searching 
for suitable sites in the US and 
Europe, with London especially 
the target for a new top business 

Fears that international 
travel may one day become 
obsolete by the development of 
new technology— ouch as inter- 
national conferences linked by 
satellite which would obviate 
the need for businessmen to 
meet in person — is not taken 
very seriously by most involved 
in business travel. 

As the world economy grows 
more integrated, therefore, and 
the ability to travel becomes 
easier, the business traveller 
can look forward to at least 
another decade *of being wooed 
and cosseted by a travel indus- 
try anxious to win and keep his 
or her custom. 




f How do you measure i 
a Business Travel Agent? 


£2:?-,. .. . ••• * 
. : v - *,i 

. ; , v y 

t 1 * ' k -, 

I—-" ■ CO , ft 11 

w«*.- ■ 1 1 

Sf O 

" U1 /. : 


?— . 

m- . 


Hit' - 

pi'.. • 

Business travel is something of a delicate 
equation to balance 

On one side you’ll actually demand cost- 

And for your money youllalso want top 
quality service 

In which case theres only one simple rule 
to follow Choose Thomas Cook Business 
Travel. Not only do we provide the best 
service around, we’re also very prudent "when 
it comes to spending our clients money 

Appoint us to handle your business travel 
at xangp= m<*ntK and you will obtain the service 
and cost savings that you would expect from 
the world’s largest travel organisation 

With over 80 specialist Business Travel 
Centres in the -United Kingdom alone, and 
more than L500 branches in 144 countries 

worldwide, we’re always close at hand to give 
you the personal attention that you need. 

When nothing but the best will do phone 
Carole Green on 0733 502598 or complete 
the coupon and well arrange for one of our 
specialists to call and show you how we 
measure up 

I To: Mr RF Marks, Director - Business Travel, Thomas Cook { 
j Ltd. PO Box 36. Thorpe Wood PETERBOROUGH PE3 6SB. j 
I I would like to know more about 'the best Business Travel I 
j Service in the world,' please arrange for a specialist to call. I 

Company Adc 

j ftosttion/TizIe 

I Current Travel Agent 

| Ap proximate travel spend overseas £ within UK £_ 

Thomas ; — j 

Cook IBmBmsm Tnwwisll 

Quite simply the best Business Travel Service in the world. 




Financial Times Thursday May 21 1987 

k* " '<# ; 


( *$3 n 

l ■ T*T .-d! 

Mr Christopher Rodrigues, managing director of American Express UK's travel management sendee division says the true cost of travel and 
entertainment Is too diverse for some companies to know. Right: Pickfords Business Travers Meet and Greet service at Heathrow. 

Controlling costs 

How to tackle the expense cycle 

TRAVELLING ON business— 
with all the related expenditure 
involved — is by no means cheap. 
Total expenditure by UK com- 
panies is now approaching 
£20bn a year, according to some 
estimates, and can be a major 
part of the discretionary 
expenses incurred by a 

Yet few British companies 
appear concerned at this. Sur- 
veys have shown that fewer than 
four out of every 10 companies 
have a written travel expense 
policy, and most consider it an 
insignificant item. 

“ Companies which would 
fight to the last drop of blood to 
get a good deal on a new photo- 
copier are cheerfully tossing 
away thousands of pounds 
because they fail to get to grips 
with simple fundamental issues 
like 1 who can spend how much 
and on what points out Mr 
Christopher Rodrigues, manag- 
ing director of American 
Express UK’s travel manage- 
ment services division. 

Many companies will claim 
that such a situation does not 
apply to them. Yet these are the 
very ones which have a frag- 
mented and inconsistent policy 
which probably costs more In 
executive time seeking to outwit 
the system than it saves in any 
badly-applied cost control 

For example, some companies 
apply a blanket policy of eco- 
nomy-only flights or second- 
class rail fares. This may save a 
few pounds in the short term, 
but usually leaves executives so 
disgruntled and exhausted that 
more is lost than gained. And 
any psychological benefits are 
lost by the chief executive more 

often than not ignoring the rules which will have a real impact'on 
laid down for the rest of the the bottom line of the company's 


The initial step in any travel 

balance sheet,” he adds. 

One major business travel 

expense system is to identify cost wbich many companies 
exactly what costs are being have already come to terms with 
incurred. Direct costs are those is the cost of feeL There are a 
which can be easily identified — number of specialist charge 
such as airline tickets, hotel cards now in operation which 
bills, and car hire. But there are can be used at nominated petrol 
also hidden costs such as cash stations. 

advances, chasing up overdue The Overdrive feel card is one 
expense claims, and cheque of the leading corporate fuel 
processing. American Express cards operated by Harpur Hol- 
es timates that according to its dings, a company whose major 
research, there are some £780m shareholders include Pruden- 
of outstanding cash advances to tlal Assurance and the Wells 

employees In the UK corporate 

■It is because the true costs of card. 

Fargo Bank. Harpur also oper- 
ates the separate Esso charge- 

travel and entertainment are so 
diverse and that information is 
rarely held in any one place, 
that companies invariably do 
not know exactly how much they 
are spending,” adds Mr Rodri- 

This position is often made 
worse by the fact that a number 
of different people may have 
responsibility for travel plans— 
ranging from the secretary who 
always books hotels through to 
the executive drawing foreign 
currency from the company 
cashier and then claiming 
expenses on his return. 

American Express's help to 
companies in controlling costs 
is based on what Mr Rodrigues 
calls the expense cycle.. This 
covers planning travel; policy 
objectives; arrangements; the 
trip itself; payment: expenses; 
reviewing the cost; and recon- 

“The system also needs to 
take into consideration both the 
direct and indirect costs if 
effective savings are to be made 

Together these cards account 
for almost a third of Lhe corpo- 
rate fuel card market and sales 
through them have increased 

the whole area of travel related 
expenses and thereby provide 
cost savings to the companies 
for whom they work.” 

Moreover, Mr Elias is critical 
of those credit card companies 
“who pander to business 
travellers in order to induce" 
them to use their products.” But 
he admits that as the new Busi- 
ness Travel card works to con- 
trol costs incurred by 
employees ‘‘it is for this reason 
that we expect a great deal of 
user resistance initially.” 

But he adds, "we used this 
approach in the fuel card mar- 
ket with our Overdrive card and 
this system now not only works 
successfully but is also in 
demand from senior company 
financial decision makers.” 

Hotels are also keen to give 
help to corporate users of their 

from £7m a year in 1982 to over services in controlling costs 

£120 ra at present 
Harpur’s computing systems 
are au in-house, enabling it to 
provide clients with a complete 

Thistle Hotels, for example, has 
a scheme for business execu- 
tives. called Trumpcard, which 
allows a company to monitor 

cost analysis within one state- and control hotel expenditure 
ment, the location of purchase, by offering different payment 
and analysis of VAT by product systems and for allowing diffe- 
category. rent levels of employees to use 

The company is next month them 
planning to launch a special Yet whatever system is 
"Business Travelcard” which adopted to control expenses. 

will cover the whole range of companies should bear in mind 

business travel expenses, from 
airlines to hotels and car rental. 

that there are unquantiflable 
costs incurred when a travel 

Mr David Elias, Harpur 's man- policy becomes too rigid, 
aging director, maintains that "The enforcement of an effec- 

thls card is aimed firmly at hel- live travel and entertainment 
ping companies control their expense system has more to do 
costs and is not a perk for with efficient accounting and 
employees. “We have absolutely administration than with heavy- 
no interest in providing special handed restrictions on your 
benefits for the business employees* activities, which are 
travellers, 1 ' he says. "Our objec- more often than not counter- 1 
live is to provide specific man- productive,” points out Mr Rod- j 
agement information covering rigaes. David Churchill i 

travel is one of the most impor- 
tant areas for travel agents. Last 
year, for example, travel busi- 
ness worth some £L2bn was 
booked through agents 
Specialising in business travel. 

Although competition is 
fierce for companies’ travel 
business, the rewards for agents 
can be considerably greater 
than selling package tour holi- 
days to mass consumers. Com- 
panies. for example, will 
usually be prepared to pay more 
for their travel— Club Class 
instead of economy— and the 
business is less subject to 
Seasonal fluctuations. 

Yet the key problem feeing 
travel agents is persuading com- 
panies to take it seriously— the 
benefits to be gained from using 
specialist business travel 
agents as part of a coherent 
travel policy can be consider- 

Not surprisingly, therefore, 
the business travel agency mar- 
ket is a fragmented one. On one 
hand, there are the small and 
long-established independent 
agencies — often descendants of 
old City shipping offices— while 
or the other there are the big 
three multiples— Thomas Cook, 
Hogg Robinson, and Pickfords 
Business Travel. 

In between are a number of 
medium-sized agencies with 
substantial interests in busi- 
ness travel, as well as com- 
panies such as the AA and 
American Express which also 
have large, business travel 
operations. New, specialist 
! independents such as The 
Travel Company have also 
emerged in recent years. 

Thomas Cook, part of the Mid- 
land Bank group, is the market 
leader for business travel in the 
UK It has more than 6,000 
clients and a UK turnover of 
£250m working through 79 
specialist business travel cen- 
tres and 47 " implants " inside 
key companies. All this is 
backed up by Thomas Cook’s 
1.500 travel offices in 144 coun- 

Although it has been the UK’s 
leading travel agency since 
1840, it is only In the past 
decade that Thomas Cook has 
really developed its business 
travel operations — a reflection 
on the industry has grown only 
relatively recently. 

Hogg Robinson Travel is a 
division of the major transport, 
insurance and financial ser- 
vices group. It handles over 
£l75m worth of business for 
1,700 companies, including 
some 24 top multinationals each 
placing at least £lm worth of 
business a year. 

Pickfords Business Travel, 
part of the National Freight 
Corporation, moved into the 
number three spot last year 
with the acquisition of Lonn 
Poly's business travel opera- 
tions. It now has 9.000 corporate 

Travel Agents 

Competing for 
the best deals 
for companies 

Travel agents are often able to nrmge the best terms for hotel 

accounts, including over 90 
“ blue-chip " clients. 

The AA has been In business 
travel since 1970 but only 
opened its first specialist busi- 
ness travel office in 1981 as the 
demand for business travel ser- 
vices began to take off! Ameiv 
lean Express has seven special- 
ist business centres and 29 

implants inside companies. It 
likens itself to a specialist 
boutique rather than a chain- 
store operation— offering tailor- 
made services. 

Alt these companies, and 
many others, are members of 
the Guild of Business Travel 
Agents. . The. guild’s members 
are responsible for about 70 per 

cent of all L t K business 

the campelitluB for 
corporate Recounts, buiina&a 
trawl agents are seeking to 
improve their competitive edge 
through service s* much a* a is- 

picktords. for example, oper- 
ates a "meet and greet" service 
at Heathrow and GaiwiCk air- 

Under this scheme, the com* 
pony** control centre at Heath- 
row receive* advance notifica- 
tion or company cbalnoen and 
senior executive* travelling 
with Pickfords. Before the busi- 
ness traveller’s arrival al lhe 
check in desk, Pickferd * staff 
will confirm the passenger s 
seat with the airline. 

Ifa connecting flight is late nr 
delayed, moreover, the Pick- 
ford’s representative will make 
new arrangements on the spot to 

S et the executive to his or her 
esUnation, _ . 

pickfords say* that the 
"experience of our representa- 
tives at Heathrow can make the 
difference between an airline 
agreeing to hang on to that seat 
for a late arriving passenger, 
long after the deadline, ox sell- 
ing it to someone else." 

Travel agencies prefer to com- 
pete on service and getting the 
best airfares and hotel deal*, 
rather than just offering bulk 
discounts based on the volume 
of business. Hinioi. the 
research company which has 
studied the business travel mar- 
ket. points out that "an efficient 
travel agent can make genuine 
cost savings for corporate 
clients by plotting the best way 
through the labyrinth of inter- 
national air fares, which is 
worth more to the client than 
quantity discounting w such." 

In the US. where business 
'travel is a much larger part of 
the travel scene, many travel 
agents belong to a consortium 
whch brings the benefits or 
large-scale operation hut 
enables them to retain their 
independence. The largest con- 
sortium is Woodslde Munagi*- 
ment Systems, of which Hogg 
Robinson is a member. 

The advantages offered by 
membership of these consortia 
are their ability to offer lower 
rates on hotels and airlines to 
clients, as well aa participation 
in world-wide computer book- 
ing systems. 

Perhaps the biggest develop- 
ment in the next few years will 
be the further growth of 
Implants into companies. Set- 
ting up a business travel opera- 
tion within a major client 
enables the agent not only to be 
more efficient in terms of time 
and resources but also allows 
them to understand more felly 
the quirks and opportunities 
unique to each company. 

David Churchill 

Airlines are well-placed to know all about business 
travel That’s why we decided to create the AirPlus Card, 
exclusively for business travel and expenses. 

AirPlus helps you and your company manage your 
business trips efficiently, before, during and after you 

Using AirPlus you can pay for travel, hotels, car hire, 
business entertainment worldwide, and of course, 
arrange this through your travel agent It allows your 
company to manage its travel expenses bettei; by giving 
itemised billing, tailored to each individual company's 

needs, not just a Standardised formula. With AirPlus, the 
need for cash advances is reduced and cash flow is 

With the strength of Europe’s top airlines behind it, 
AirPlus will be invaluable in making business trips easier 
and more hassle-free. Companies will find it the most 
useful card around because it is limited to expenditure in 
the business environment. 

Telephone the British Airways AirPlus Section 
(01-562 0078) today, and find out how much the AirPlus 
Card can help you and your company. 

• travel 






Financial Times Thursday May 21 1987 



Air Charter 

Providing a touch of class 

Brighter future for air taxis 

RARELY - -BAS the business 
traveller been wooed so assi- 
duously us he is today, as the 
airlines battle for his custom 
through heavy advertising cam- 
paigns- in newspapers, maga- 
zines and on TV. as well as 
through direct mailing to both 
company and private addresses. 

Behind this . vigorous 
approach -lies the increasing 
recognition that with the sub- 
stantially higher fares that he 
pays compared with the 
plethora of discounted rates , 
available to the leisure 
travellers, . the business 
traveller is' the golden goose of 
civil aviation, not only because 
he is travelling in increasing 

numbers, but also because the . 
pressures being placed upon 
airlines by governments and 
- consumer groups io reduce even" 
Airther the cheaper fares levels 
are wreaking havoc with re- 
venue yields. 

For business travellers are 
becoming not only more fasti- 
dious in an era of increasingly 
congested air travel, but also 
more voluble in expressing 
their views about what they get, 
and more significantly, what 
they want 

A recent survey of over 17,500 
international scheduled air 
travellers conducted by Euro- 
pean Data & Research showed 
that international air travel is 
still very much the preserve of 
the businessman— with as many 
as three out of four of all 
passengers being men, of which 
some 85 per cent were travelling 
on some kind of business. 

Moreover, despite reports of a 
downturn in uS travel to 
Europe, because of the weak- 
ness of the dollar, a high propor- 
tion of the business travellers 
sampled were US originating, 
indicating that while US tourist 
may not be coming to Europe, 
their business counterparts cer- 
tainly are. 

The survey also threw up 
some other significant indica- 
tions of the habits of business 
travellers. As many as one in 
three sampled were renting a 
car, over 80 per cent of them 
with one of the big five car re 1 
ntal chains. 

Most of those who had used a 
rented car had been reasonably 
satisfied with it, but the degree 
of satisfaction was found to vary 
from country to country con- 

But travellers’ 'satisfaction 
with their hotels- was at a lower 
level than with car rental The 
major hotel chains were found 
to be rated higher than other- 
hotels in eachcountry, the best- 
ra ted hotels being those in Ger- 
many, France and Switzerland. 

So far as airports were con-. 

airport services, -although, re- 
staurants were criticised signih 
ficantty more often than any 
other airport facility. 

.The survey also probed 
passenger^ reasons: for selec- 
ting a particular airline. Most of 
them nad-played some part in 
actually choosing the airline, 
although ■ -this varied from 
almost -90 per cent on' some 
routes (egUK- Australia) to only 
SQtdTOpiK cenjton most Euro- 
pean Troutes.. 

-There were also considerable 
differences from airline to air--, 
line in the ' degree to which 

passengers had' been influenced 
by such factors as the arrival 
and departure times of their 
. flights (indicating that ah air- 
line can win or lose business by 
. inconvenient flight scheduling), 
travel agents recommendations, 
costs, frequent-flyer club 
membership, the airline’s rep- 
utation for food; service, and in- 
flight comfort and so on. 

What' the survey showed, in 
short, was thatyirhat the.average 
' traveller, and -particularly the 
business traveller, wants most 
. of all in order of importance is 
convenience of departure/arri- 
- val times, and .good service on 
board, including the quality of 
seating (especially important on 
-long-haul flights but less impor- 
tant-on short flights). Low fares 
are not given as a prime reason 
for flying with a particular air- 
line (largely because for the 
average business passenger (be 
current regulations ' governing 
fares, structures .mean that 
although competitive in other 
ways the airlines are obliged to 
charge comparable fares); and 
that personal recommendation 
from colleagues and. friends 
coorits.for a groat deal in choice 
of airline, with travel agents* 
recommendations playing a less 
important role. 

For all that ;his fare is sub- 
stantially higher, the average 
business traveller gets modest 
enough benefits. 

Mostly, apart from Che undeni- 
ably spacious surroundings of 
first-class cabins and the less 
spacious business or Club Class 
(bat still wayabovethe cramped 
steerage conditions of- economy 
cabins), he gets the benefit of 
. flexibility, the ability to change 
travel plans at will, moving from 
one airline to another to suit his 
own convenience. 

For the rest, the fringe be- 
nefits, such as advanced seat 
selection, executive lounges; 
and free limousine travel be- 
tween office or home and the 
airport, while more than wel- 
come in creating a more com- 
fortable ambience in which to 
.travel, are of lesser importance 
: :to .most business travellers, 
although those who have, sam- 
pled- them would probably 
admit that- now they would not 
like to be denied such frills. 

As a result of this increased 
volubility, together with the air- 
. lines’ own recognition of their 
direct value to the revenue in- 
flow,, airlines are paying more 
attention to business travellers. 
On short haul routes in Europe, 
some airlines (notably, Lufth- 
ansa and Iberia) have already 
gone so far as to increase the 
seat' pitches to give more leg 
room to the business travellers, 
in addition to Improving the 

• evofall^ r.gualftyv 

That move 1 has already 
obliged British Airways to 
admit that it is- studying its own 
Club Glass concepts, and' may 
-well decide to improve them be- 
fore many more, months are out 
It is also stiidyipg improvements, 
to its long-haul business class 
Super Club services, with im- 
provements also likely to be on 
the way. ' 

. While in Europe BA’s Club 
Clara makes; money for the air- 
line, there have been signs that 
the •=“ brand lqyalty H of many 
UK business travellers is now 
being strained by the improving 

quality of service on other air* 
ll n es — especi ally the increased 
leg - room, which makes BA’s 

cramped three-* breast style of 

seating; especially in Its Boeing 
7375, increasingly unacceptable 
to many business travellers. 

While other elements of ser- 
vice to business travellers are 
improving, such 1 as the stan- 
dards of . courtesy shown to 
passengers on board (something 
that on many short and long- 
haul airlines is long overdue), it 
is this overall standard of com- 
fort and convenience that prob- 
ably matters most to the busi- 
ness traveller, although any air- 
line that ignores the other ele- 
ments of higher quality of ser- 
vice does so at its periL 
. For -what the European Data 
& Research survey showed, as 
have other surveys over the re- 
cent past conducted by airlines 
themselves and other organisa- 
tions such as aviation journals, 
is that business travellers are 
showing a greater tendency to 
shop around for their flights. 

As part of this c hanging atti- 
tude, the business traveller is 
also questioning the level of 
fares he has to pay 

A recent study by the Inter- 
national Foundation, of Airline 
Passengers’ Associations, based 
in Geneva, showed that many 
business _ travellers - really 
thought the current discrepan- 
cies between their own and the 
cheap discount rates to be un- 
fair,' and that in many cases the 

higher . quality of service they 

S t was not sufficient to justify 
at gap. 

Accordingly the IFAPA com- 
missioned Mr Hugh Wei burn, 
the inventor of the Advanced 
Purchase Excursion or Apex 
faro, to design a "Business 
Pa ssenge rs* Extra Option" or 
"BPEX” fare. 

This is deliberately designed 
initially for European business 
travellers who are willing to 
adapt their requirements in re- 
turn for . lower prices. It 
broadens the range of choice 
available for those who can 
make firm arrangements a few 
days in advance, who do not 
always need to travel at times of 
peak demand and who do not 
necessarily require the services . 
of more than one airline to be 
included within one ticket 
In return for avoiding the 
costs of product features which 
they do not require, such as last i 
minute changes of reservations , 
and itineraries and travel at 1 
peak periods, business | 
travellers opting for BPEX , 
should be able to enjoy signifi- ! 
cant reductions in present foil 

The airlines have yet to 
accept the concept— it is ex- 
pected to be discussed at the 
next annual meeting of the 
International Air Transport 
Association — and precise levels 
'of BPEX fares have still to be 
worked out. 

Michael Donne j 

THE BUSINESS traveller has 
access to more air charter and 
air taxi services than ever 
before and is using these ser- 
vices more often, more reg- 
ularly and with greater confi- 

The use of air taxis and air 
charter services has been 
routine In the US for several 
decades. Business travellers 
there no longer need much 
encouragement to use light air- 
craft as regularly and with as 
little fuss as they use taxis on 
the ground. 

In Europe, where distances 
are not as great as in the US and 
where the high cost of sche- 
duled air services is a brake on 
the free growth of air travel, the 
development of air taxi and air 
charter services until quite 
recently has been at a more 
modest rate. With the emexg- 
ence of healthy economies in 
much of Europe and the con- 
tinuing need for face-to-face 

meetings in spite of the pro- 
liferation of electronic office 
communication systems, the air 
taxi operators have begun to 

The growth has helped shar- 
pen the focus of the UK Govern- 
ment on to the needs of the 
business traveller and business 
aviation. Mr Michael Spicer, the 
minister for aviation this spring 
emphasised the growing oppor- 
tunities for business aviation to 
serve London from local air- 
fields around the capital. 

He told the Air Transport 

Operators’ Association 

(formerly the Air Taxi Oper- 
ators' Association) that he was 
convinced that the Government 
should not create a single 
specialist business aviation air- 
field to serve London. 

“ Business activity is not con- 
centrated in any one particular 

S art of the city or its surroun- 
ing catchment areas. It is a 
matter of good fortune that we 
have a ring of airfields around 
the capita] catering for differing 
geographical sectors with over- 
all capacity to spare," Mr Spicer 

He urged the business avia- 
tion industry and users to 
capitalise on these assets and 
suggested that the variety of air- 
ports could encourage competi- 
tion among operators. 

The new arrangements for 
simpler and more rapid clear- 
ance of British and other Euro- 
pean Community nationals 
embarking in the UK, 
announced by the Home Secret- 
ary in April, were also applied 
to business travellers under the 
business users concession, with 
effect from April 13. 

“This provides for UK and 
other European Community 
nationals on business flights not 
being required to have their 
passports checked each and 
every time they leave the coun- 
try," Mr Spicer said. 

The Government confirmed 
the policy of successive govern- 
ments of giving priority to com- 
mercial airlines over business 

aviation at Heathrow and Gat- 
wick airports. The policy was 
first announced in a Govern- 
ment white paper in 1973 and 
was confirmed in another white 
paper in 1985. The aim was to 
make the most effective use of 
scarce runway capacity at the 

The Civil Aviation Authority 
had hoped that business avia- 
tion would be banned entirely 
during the peak periods at the 
airports, but the Government 
ruled against such a blanket 

Instead the Government laid 
down rules which provided for 
business aviation, the air taxis 
and small air charter aircraft, to 
continue to use Heathrow and 
Gatwick during peak periods at 
the airports, provided the users 
obtained the permission of the 
airport operators. 

The rules do provide for some 
restrictions on general and 
business aviation and on all- 
cargo air services, but Lhe air- 
port authorities are able to offer 
exemptions from the restric- 
tions at their own discretion. 

Nevertheless, Heathrow and 
Gatwick are going to become 
progressively more difficult for 
business aviation operators and 
their business travel customers. 
This is because the pressure on 
runway capacity and terminal 
space is almost bound to con- 
tinue to increase, as growth in 
international and domestic air 
travel continues. 

This will put pressure on the 

business aviation operators to 
seek out and develop the smal- 
ler airfields, often with limited 
facilities at the moment, but 
with potential for development 

The Government has already 
secured additional permanent 
facilities in the south east for 
business aviation. There are 
enclaves for civil aviation use at 
the Royal Aircraft Establish- 
ment airfield at Famborough, 
Hampshire, owned by the Minis- 
try of Defence and at Royal Air 
Force Northolt, Middlesex. 

The commercial contract for 
the civil enclave at Fam- 
borough where the 1985 White 
Paper forecast a potential of up 
to 25,000 business aviation 
movements each year has 
already been let This total, if 
realised, would be over 80 per 
cent of the total business avia- 
tion movements currently 
recorded at Heathrow and Gat- 
wick combined. 

The Government does not 
believe there is the same poten- 
tial for a civil enclave for the 
development of business avia- 
tion at Northolt, although prop- 
osals for this are gaining 

At the same time, the business 
aviation industi-y has expressed 
its concern that inadequate cus- 
toms provision at the smaller 
airfields is inhibiting the 
growLh of business aviation. 

Lynion McLain 





It’s our business to provide systems 
that will help you 


awEBicgfiii Company 







Financial Times Thursday May 21 1987 



• Inter Ctty 


Packaging the executive 

TO THE business traveller, rail- fng stock^-and hence nothing to. 
ways mean . Intercity, British match the super last' trains 
Bail’s flagship e xp res s service, .operating oh special track, in 
which celebrates its 21st birth?- France-. 
day this year. ' l !The- next generation - of elec- 

■: The celebrations have been trie' locomotives, called the 
noisy, .'and the publicity self- ■ Electra class, is under construe- 
it— but the fashionable ' tioii, however, and will be cap- 

nostalgia has not been allowed 
to obscure a growing concern 
"tor quality. 

. ’ Intercity was born in 1966, 
when -electrification 'trans- 
formed the route between Lon- 
don, Liverpool and Manches- 
ter— though the name was used 
ih its hyphenated form. 10 years 
earlier to describe a steam 
hauled express.^ 

- . Steam traction has since 
disappeared from the network, 
'which Is now split between elec- 
tric. and diesel hauled ser- 
vices— but development has 
been neither 'smooth- nor 

Electrification reached Glas- 
gow in 1974, but then petered 
but Inr.'Uie spending cuts of the. 
early 1970s, -and ; is: only how 
being extended to Edinburgh in 
a £300m project' on the East 
Coast main line- .V 

This service has qow reached 
Norwich, and wall reach die 
Scottish capital by 1901, cutting 

able of operating up. to .140 mph, 
though the number of areas 
' where track conditions will, per- 
mit maximum speeds is limited. 

A fleet of new coaches is also 
being -designed to improve the 
environment and ride char- 
acteristics for passengers. . . 

Like the resUof British Rail, 
Intercity: is forced to make the. 
best 'possible tise'df its assets, 
and this sometimes leads to 
claims that trains are run.’ with 
too few coaches to accommo- 
date the number of passengers 
wishing to travhL ■ 

BR regard these, claims as 
im&ir-r-it says 1 the .number of 
coaches^ rarely varies on a given 
route, so- that if passengers 
travel on overcrowded trains it 
must -be because they consider 
it is still the cheapest or most 
convenient way to traveL 

-intercity has a serioifr prob- 
lem . to overcome— the sector 
had ah operating loss of £ 11 7 . 2 m 

journey tinier by up to half- an , in' 1985-86 on gross income of 
hour. . - . £813-4m, and is required by the 

British Ratt'achieved a major -Government to go into profit- 
success in the express- travel differed as a return .of 2.7 per 
field with the development Of cepton assets - employed— by 
the distinctive high speed train,-- - 1990 . 

markete&asth&lnterCity 125, .; - : With targets like /that, it is no 
which to stilLthe fastest, diesel surprise oat the sector’s 100 
hauled train in the World. : ; electric locomotives : mod 91 
It suffered *, major setback, HSTs have toda a lot more work 
however, with, the demise of the^ to earntheirkeep thaptbe rolj- 
Advanced Passenger . Train ing stock of.other-vraCtd.rail- 
tATFMna blaze of bad publicity ways: . 

about faulty fitting miechantoms -Many HSTs jetoek tip: more 
and sick passengers. . than 1,000 milqs a dajv and all 

Then j^vtLiwen hovBhdherr achieve a. nrimnt ia»><tf..220,000 
to produce a tec 6- -miles a year. By way of comparj- 
' : in^roH- : -*on^thi8 • tbrecr 'times the 

mileage rate of express locomo- 
tives m the steam age. 

The received wisdom within 
Bri tish Rail is that Intercity ser- 
vices are competitive with air 
travel for journeys of less than 
300 mile* 

First-class business passen- 
gers require convenience, com- 
fort, quality and reliability, and 
Intercity’s pricing and market- 
ing strategies are designed to 
stress the advantages the train 
can offer in each of these cate- 

The best example is the 
Executive ticket, which 
includes free- car parking, seat 
reservations and meal vouchers 
in one easily purchased pack 

Another example is the 
accent on air conditioning and 
improved quality seats in 
Intercity advertising. 

But probably the most impor- 
tant breakthrough in this field 
is .the introduction of the 
Cuisine 2,900 catering cars, now 
being introduced -at the rate of 
one a week on trains to and from 

For the first time, food is 
being prepared in central kitch- 
ens and delivered fresh to 
trains every day. This intro- 
duces the flexibility to serve a 
greater variety of dishes — 
including those with sauces, 
and those requiring a long cook- 
ing time. 

Intercity says the old Limits 
tions on time - and space in 
travelling restaurant cars have 
disappeared. The chef now sim- 
ply finishes off the cooking pro- 
cess, and stewards return the 
dirty crockery to the central 
kitchens — leaving more time to 
look after the customers. 

This means more use of trol- 
leys to deliver refreshments to 
passengers - in their seats— 
avoiding the trek to the buffet 
car. Nevt^kleaa are. 

tried, such as the City Bistro on 
the London to West Midlands 
. trains, where menus offer pasta 
dishes and curries, as well as 
more- traditional steaks. 

, M Regional food, new dishes in 
the- buffet, freshly produced 
fare and a new way of presen- 
ting food is becoming the norm. 
The sausage roll, pork pie, curly 

sandwich and slab of fruit cake 
which so epitomised the old 
order have been swept away, 
replaced by a new range oft 
freshly prepared, high quality 
products,” Intercity, claims. 

There are no figures for 
Cuisine 2,000 as yet But the new 
system will be doing well if it 
performs as well as XnterCity’s 
revamped sandwiches, which 
have more than doubled sales in 
the last 12 months. 

The new-style hot bacon roll 
has also, gone down excep- 
tionally well — sales are 
expected to reach 1.5m in 1987, 
compared to 300,000 annual 
sales of the toasted sandwiches 
they replaced. 

On several major routes, 
however, the reintroduction of 
the Pullman class in 1989 is 
probably the single most impor- 
tant factor in the calculations oil 
businessmen deciding whether 
to let the train take the strain. 

Pullman has revived stan- 
dards of passenger comfort in 
first class compartments which 
most people thought had died 
with the steam age. 

Five Intercity Pullman ser- 
vices operate at present — 
between London and Manches- 
ter, Liverpool, Newcastle. 
Leeds and Blackpool. Sheffield 
and Birmingham will Join the 
Pullman network on May 1L 

For £10, passengers can also 
join the Pullman Club, which 
entitles members to use luxury 
lounges at King's Cross, Euston, 
Leeds, Newcastle and Edin- 
burgh (even though the service 
does not yet extend across the 

Most Pullman lounges also 
feature Rendezvous Rooms 
offering a business meeting 
facility for up. to 10 people. 

P ullm an -is the cutting edge of 
BR's strategy for attracting the 
first-class business passenger 
market, estimated at more than, 
£70m a year. 

ZnterCity is also concerned to 
capture the growing market for 
second class business travel, 
however, which is thought to be 
worth in excess of £100m a year. 

A number of companies and 
institutions, some quite large, 
will now allow their staff to 
travel only second-class, and 
many will have .' a choice 
between the train and collec- 
ting a mileage payment for driv- 
ing their own car. 

Thi* is a market ZnterCity has 
pursued vigorously, though 
nothing has yet come of plans to 
cater for '-it by- creating an 
intermediate class between 
first and second. 

- - Kevin Brown 

A YEAR ago the -UK car rental 
business was one/of the sectors 
becoming extremely worried by 
the slump in travellers to the 
UK from North America 
because, of fears of terrorism in 
Europe! One car. rental com- 
pany, for example, recalls a par- 
ticularly bad day at Heathrow 
when none of the Americans 
who had p re-booked a car 
turned, up to collect iL . 

Yet as it turned out, the mar- 
ket from North America reco- 
vered more quickly than- 
expected and the business 
traveller was the quickest to 
return. But the damage done by 
the fall off in visitors in the 
early part of the year was 
enooghi according to trade esti- 
mates, to leave the overall mar- 
ket growth in the UK last year at 
under 10 per cenL 

Total spending on UK vehicle 
rentals was estimated at some 
£400m last year, of which about 
£300m came from car rental 
with the rest coming from van 
and truck hire. 

About six out of every 10 ren- 
ters of cars, moreover, were 
estimated to be business 
users— emphasising the import- 
ance of 'the business traveller to 
the rental markeL 

For most business travellers, 
the choice of which rental com- 
pany to hire the car from is a 
combination of several factors. 
Price -is clearly a factor but not 
the most Important What is 
important however, is the level 
of convenience and service that 
a business traveller can expect 

After a delayed flight and the 
hassles of customs and baggage 
delays, most businessmen arriv- 
ing at an airport simply want 
pick up a car with the minimum 
of ftass. 

Not every executive, of 
course, has the complete free- 
dom to choose which rental' 
agency to use — since that often 
depends ' on deals already 
negotiated with his or her com- 
pany. But it is perhaps a sign of 
the importance the business 
traveller pays to convenience 
that he dr she Is willing to buck 
the system if it means getting 
hold of a rental car more easily. 

The car rental companies’ 
own research has shown that 
convenience and service are the 
key factors. Renters’ priorities 
include, for example, a rapid 
reservations service, with inter- 
national links if appropriate. 
They obviously want a clean car 
in good working order as well as 
arrangements such as being 
able to pick up the car at one 
location and drop it off at 
another, after office hours if 
necessary. ■ 

All the rental companies are 
well aware that business 
travellers can be fairly fickle 
about which renter Ifiey 
choose — after all, a Sierra is a 
Sierra from- whoever It to 
rented— so they realise that it is 
essential to concentrate on con-' 
venienee and .service:' 

Car rental 

Loyalty In the 

Hertz rental cars undergoing checks and maintenance before 
passing to customers at Heathrow Airport 

“ The . car rental market is 
becoming more and more com- 
petitive and it is the service 
aspect that is winning,” con- 
firms Mr John Howard, manag- 
ing director of Hertz UK. 

One aspect of the service 
offered by Hertz— which is 
receiving " heavy television 
promotion at present in the 
commercials featuring Ronnie 
Corbett and Ronnie Barker— is 
its link up with British Airways. 

Hertz has been appointed the 
BA preferred car rental sup- 
plier world-wide for three years 
and the exclusive contractor for 
the Super Shuttle Drive service 
for two years. 

Under the deal. Hertz guaran- 
tees to have a car waiting at the 
destination airport for any 
passengers flying the BA Super 
Shuttle service from Heathrow, 
Manchester, Belfast, Glasgow, 
and Edinburgh airports. 

No advance reservation is 
required and paperwork is com- 
pleted in the departure Shuttle 
lounge using the Hem booking 
computer which allows the busi- 
— ness r traveller. . to board the’ 

Super Shuttle flight 'carrying 
the rental documents. On arri- 
val at the destination airport, 
the customer can go direct to 
the Hertz car. 

Apart from this deal. Hertz — 
which claims to be the oldest 
established car rental in the 
world — goes ail out to woo the 
business traveller. 

For example, it has intro- 
duced a customer loyalty prog 
ramme which means that for 
every time a Hertz car is rented, 
bonus points are accumulated 
towards the free hire on holiday 
of a Hertz car. The accumula- 
tion of 600 points, for example, 
would entitle the customer to a 
free week’s rental anytime in 
any of the 130 countries in 
which Hem is represented. 

Avis— the company which 
claims to “try harder" in Its 
advertising — has also recently 
announced a link-up with Brit- 
ish Midland airways aimed at 
wooing the business traveller. 
Avis's rapid rental service will 
be available from the British 
Midland departure lounge at 
Heathrow and covers a number 
of the smaller regional airports', 

such as Birmingham, East Mid- 
lands. and Leeds/Bradford. 

“Avis has been steadily 
developing its portfolio of pro- 
ducts and services aimed at 
making the business traveller's 
life easier and more efficient,” 
claims Mr Geoff Corbett, manag- 
ing director of Avis. 

While Hem and Avis are the 
major rental companies on a 
world-wide basis, the UK mar- 
ket is beaded by two other com- 
panies— Godfrey Davis Europ- 
car and Swan National. 

Euro pear, which claims to be 
the UK’s oldest car rental com- 
pany. operates a rental fleet of 
over 10.000 vehicles, encompas- 
sing 67 different models. It 
offers rental facilities at over 
2 80 locations, including on-site 
offices at more than 80 Intercity 
railway stations and at 35 UK. 

The Rail Drive service, for 
example enables long-distance 
travellers to cover the greater 
part of their journey by train 
and to have a car waiting for 
them on arrival. 

Mr David Hardman, managing 
director of Godfrey Davis 
Europcar, points out that 
''Europcar now holds p re fere n-. 
tial rental contracts with over 
3,500 British businesses — 
organisations including Marks 
and Spencer. British Gas, Thorn 
F-Vi and British Aerospace.” 

Swan National, a subsidiary 
of the Trustee Savings Bank, has 
a fleet of some 8,000 vehicles 
and over 100 branches in the 
UK. The company estimates that 
about 80 per cent of its business 
is from the business traveller. 

Mr Tony Grimshaw, managing 
director, points out that only 
one in five companies approach 
their car rental needs in a 
systematic way. Many com- 
panies instruct employees to 
rent a car when necessary—' ” a 
very costly way of purchasing 
car rental.” 

He says that ’’once a company 
is made aware of the benefits to 
be gained from a favoured 
rental supplier, then it is to 
their advantage to open an 
account with one of the national' 
car rental firms." 

The smaller rental companies 
in the UK include Budget, Ken-* 
ning, and Guy Salmon car 
rentals. Guy Salmon has just 
been acquired by the Mercan- 
tile Credit Company, owned by 
Barclays Bank, and is planning 
an ambitious expansion prog- 
ramme aimed at the business 

Apart from the normal rental 
services, Guy Salmon also offers 
a chauffeur driven limousine 
service. A chauffeur-driven 
Daimler limousine, for 
example, costs £138 a day. More 
than half of users of the chauf- 
feur service are businessmen 
who are seeking the service and 
convenience of being driven in 
•luxury while they work in the 
back seat 

rttraerr » ■- 

• .»; • 

■ .■ •vv'i. ' 

>9i9 mmiiin i * niiMiflimn 


• HIM 

Other airlines are. content > flf- ' 

you fexn airport W airport . ' 

TWviceisavailableforaBFuit (toen car will pidc you up'fiom your 

home or office, within a 40 mile radius 

Or Manchester Birmingham, 
Glasgow or Edinburgh (providing you 
take a British Caledonian or Brymon 

Airways connecting flight to Gatwick). 

And when you reach your 
destination in the USA, a limousine 
will rake you anyvdieie wirhin 40 miles 
of the dry centre. 


Its all in the cost of die ticket and If you're going to the USA, see 

your travel agent. And find out more 
about the airline that really goes no town. 

irk all part of the service. 

With British Caledonian you 
become a valued passenger not at the 
departure gate. But at the garden gate. 

^ wan 

We never forget you have a choice. 

' - i--~ s -.r<-n=f -I" _ 

Financial Times Thursda- Ma 21 1967 


Super-executive class in-flight service on the Boeing 747 

Travelling wives 

Wooing the spouses 

THE EXCUSES are getting 
weaker. In the old days the 
businessman was packing his 
bags for a foreign trip to the 
accompaniment of his wife 
querying “ why can’t I come, 
too,” could fob her off with the 
horrors of extra travelling and 
accommodation costs, and the 
tedium of being left on her own 
all day Ln foreign parts. Now the 
travel industry is coming to the 
aid of abandoned wives— and 
husbands married to a globe- 
trotting female executive. 

Virgin was quick off the mark 
to offer a free economy ticket to 
the US for anyone buying into 
its first class cabin. Being a 
street- wise airline it suggested 
that a businessman might like to 
take his secretary along on the 
complementary seat but it was 
broad-minded enough to allow 
wives to travel, for once. Ln the 
guise of secretaries. Indeed, for 
all the formality of the language 
in some special “ spouse " 
offers, no close examination of 
marriage certificates is made, 
although wives are the ideal 
restful companions on impor- 
tant business trips. 

The trans-Atlantic airlines 
tend to offer discount tickets for 
travelling companions accor- 
ding to the time of year— one or 
other of them is usually promot- , 
ing such an incentive in off-peak 
time, and a good travel agent 
should be able to advise. 
Travelling across North Amer- 

ica can invariably produce a 
cheap, or free, extra flight, so 
competitive are the local air- 
lines there. 

Eilrope is still locked in an 
airline cartel but when new car- 
riers squeeze in there are, 
inevitably, benefits for users. 
Transavia, which gained access 
to Amsterdam last winter, has a 
special Spouse Fare — a 50 per 
cent discount on the £85 single 
first class charge, or the £58 
economy. And just to prove that 
national carriers can put filling 
aircraft above fixed price Iberia 
is offering a third off for a 
travelling companion to anyone 
booking one of its low cost 
Moneysavers to 13 cities in 
Spain until June 25. 

Unfortunately businessmen 
this month are more likely to be 
flying to Frankfurt or Zurich 
rather than Malaga or Alicante, 
more’s the pity for their 
spouses. But even if you cannot 
get a discounted fare for your 
partner there are other avenues 
to explore. You can often save 
considerable sums by taking a 
package. This Is particularly 
true on Journeys to the Far East, 
where there is a surplus of hotel 

For example. Oriental Magic 
has been mounting a “ No need 
to travel alone to the Orient” 
promotion which provides two 
return economy tickets, plus 
accommodation in the Far East, 
for less than the cost of one 

business class ticket It is a real 
test of love— giving up the 
spaciousness of life in the front 
.of the aircraft, and the gracious- 
ness of oriental women, to enjoy 
the company of your spouse. 

The Far East has another 
great attraction for travelling 
doubles— hotels charge by the 
rooms rather than by the per- 
son. Indeed in many cases it is 
cheaper to share a room than to 
go solo— the hotel managers 
rejoice in the fact that your 
spouse will be eating expensive 
hotel food and drink expensive 
hotel beverages. Wives have a 
weakness for room service. 

With luxury hotels in big 
financial centres like Singapore 
indulging in an orgy of competi- 
tive price cutting there has 
never been a better time to ful- 
fil all those promises of 44 you 
can come on the next trip.” On 
the other hand any savings on 
flight and accommodation are 
expected to be swallowed up in 
the shopping palaces of Hong 
Kong and Singapore. 

You will rarely have to pay 
more to accommodate your 
spouse abroad. The UK is vir- 
tually alone in charging accor- 
ding to the number of occupants 
rather than by the room, thus 
turning away both custom and 
profit In the US, your hotel 
room is your residence while 
you pay for it and you can pile as 
many spouses in as you like. 

There me signs that British 

hotels are waiting up to the 
marketing possibilities, and 
tempting businessmen to add 
week-end breaks to their work- 
ing week, with discounted 
rooms and incentives for bring- 
ing a partner. Lad broke Hotels 
gives its Club Card holders free 
mid week accommodation for 
spouses, as well as 20 per cent 
off on weekend breaks. Its flag- 
ship hoteL the Royal Berkshire 
at Ascot offers spouses luxury 
rooms at £20 a night Best-West- 
ern. and other leading hotel 
chains, promote equally attrac- 
tive packages, with the best 
deals aimed at their regular, 
card carrying, customers. 

Most businessmen, and 
businesswomen, are well aware 
that their mates have an 
exaggerated view of the plea- 
sures of foreign travel Taking 
them on tbe next trip to Lagos or 
Riyadh might keep them quiet 
for years. Stock in hotel rooms; 
horrified by the prices in the 
shops; forced to talk to the wives 
of business contacts with mini- 
mal English; and conscious that 
if they were not there the 
spouse would be having 
(however unlikely it may seem) 
more ftro— to be the appendage 
of a worker is a dismal prospect 
It is a high price to pay to be 
part of Mrs Evadne Currie's 
drive to ensure that British 
entrepreneurs don't catch AIDS 
by going foot loose into the 

As Ln most cases there is a 
middle way. More and more 
companies now pay for a spouse 
to go with their working partner 
on the occasional trip abroad. It 
leads to domestic peace and can 
produce better profits— to have 
an accomplice in an alien cli- 
mate improves confidence. 
Often more family oriented 
foreign businessmen melt on 
the sight of the English 

businessman’s wife. By astute 
use of special ofTers, it need not 
cost any more, especially when 
the saving on gifts is taken into 

Looking around a business 
class, or more frequently an 
economy class, cabin on a late 
flight back from some dismal 
foreign city the British mer- 
chant venturers do not look like 
happy free hooters, satiated 
with memories. Invariably they 
look like men and women who 
just want to get home. 

Not for them the pleasures of 
the Royal Suite at the New 
Otani hotel in Tokyo, with its 
special door hidden into the 
wardrobe which provides a dis- 
creet exit for transient compan- 
ions. For most business 
travellers foreign travel is han- 
ging around airports, hanging 
around offices, hanging around 
restaurants, and hanging 
around bedrooms— and wonder- 
ing what's happening back at 
the ranch. 

Antony Tftomcroft 

Here's where to find them. 

and elegance as a way of life. The Leading Hotels of the World are part of that 
life. Around the world, 230 hotels provide the service, decor, cuisine and attentic 
to detail which qualify them as 'Leading Holds of the World.' Send for our 
worldwide directory. For reservations telephone: 0800 181 123 toll free in Great 
Britain and Northern Ireland. Outside Great B rit ai n , London ((H) 583 4231 or see 
your travel agent. 

t~iw . — C ountry Postcode. 

Write to: The Leading Hotels of the World, 15 New Bridge Sheet. London EC4V 6AU, England 

Ui^Jeadin^Hotels of th&Wbrlcf 

- *. v . *•. . .* , . Wi 

' ’ - *. . 

Lady Croat Ekacuthm bedroom Jn the Croat Hotel, Glasgow 

Women executives 

Hotels stress 

EVERY WOMAN, Virginia 
Woolf pointed out. needs a room 
of her own. That much is clear. 
But when it comes to the grow- 
ing band of women business 
travellers, the question being 
asked increasingly is just what 
kind of room she requires. 

An apparently frivolous 
preoccupation with pastels, 
chintz, room fragrances and 
vanity lighting has been exercis- 
ing the minds of some of the 
world's largest hotel groups, 
anxious to attract this growing 

The importance of the female 
sector in business travel is 
undeniable. Less than a decade 
ago the proportion of women 
among business travellers in 
Europe, including the UK. was 4 
per cent By last year the figure 
had risen to 30 per cent In the 
US. the percentage is even 
higher and the New York Times 
has predicted that by the year 
2000 women will be responsible 
for nearly half of all business 
trips. The famous brand loyalty 
of women has also made them a 
particularly attractive target to 
marketing specialists. 

Awareness of their growing 
importance has led to changes 
more fundamental than a 
cosmetic tinkering with the 
decor of hotel rooms. The hor- 
ror stories that were legion 
among women pioneers of busi- 
ness travel in the dark days of 
the early 1970s have, thankfully, 

Penny Simpson, now British 
representative of the Ramada 
chain with 600 hotels 
worldwide, recalls one particu- 
larly unpleasant incident when 
she was working as a conference 
organiser. Her 40 delegates 
were ensconced upstairs in the 
conference suite of a large Lon- 
don hotel when she went down 
to the foyer to check administra- 
tive details. 

When she went to the lift to 
return to the suite she was 
unceremoniously asked to 
leave. Hotel staff had mistaken 
her for “a lady of the night.” She 
remembers indignantly: “I had 
to go through the ignominy of 
telephoning to the conference 
that rd organised and asking 
them to vouch for me” 

This would be unlikely to hap- 
pen today in the major cities of 
the world, says Penny Simpson. 
“But outside the capital there Is 
still room for improvement” A 
report by the Automobile 
Association as recently as 1985 
observed an insensitivity to the 
needs of the woman business 
traveller, especially where it 
came to service in public rooms. 

There was a tendency to seat 
the single woman dining alone 
out of sight behind pillars or 
tucked away in a gloomy corner 
as if her presence were an 

Consciousness has been 

raised since then and although 
women travelling alone still 
tend to opt for room service 
rather than brave prying eyes in 
restaurants and bars, those of a 
more courageous disposition 
will find a discreet and respect- 
ful welcome from the staff, at 
least of the more enlightened 
hotel groups. 

But the unwitting slights do 
continue in some hotels. “ When 
you're with a male colleague, 
they always assume he's your 
boss or your boyfriend. And 
you're probably the boss!" says 
Penny Simpson. There is some 
justice in the fact that she now 
organises the British end of 
Ramada's Travelling Business- 
woman Programme, which 
involves training in “ staff 

Ramada has rejected the 
chintz principle and operates 
instead on the basis that women 
want 44 equal treatment rather 
than special treatment” 

Market research has shown 
that security is of paramount 
interest to the women business- 
traveller and, accordingly, 
Ramada emphasises its locking 
devices, peep-holes and 24-hour 
security. Staff are trained in 
“ room key privacy ” which 
means they pass the key dis- 
creetly to guests and do not 
loudly announce the room num- 
ber. Nor do they disclose room 
numbers to telephone callers. 

But these precautions are uni- 
versal; they apply as much to 
male guests as to female guests. . 
Similarly, restaurant staff are k 
taught that “ If the lady made' 
the booking, she probably wants 
to choose the wine. She also 
probably wants to taste the 
wine— and to pay the bill,” says 
Penny Simpson. 

Crest, with 45 botels in the UK 
and 34 in the rest of Europe, 
encourages a similar approach 
by restaurant staff Company 
public relations representative 
Susan Dean said: “We try to 
make the woman business 
traveller at ease in tbe dining 
room, not stick her out of the 

Security is also stressed and 
for an additional £10 or so a 
night, guests can stay in special. 
Lady Crest rooms with a spy 
hole and a chain as well as pas- 
tel coloured walls and carpets, 
hairdryers, make-up mirrors, 
sachets of body lotion, extra 
large towels, towelling bath 
robes, skirt hangers, bathroom 
scales, a basket of fruit, a soft 
drink tray and a bowl of fragrant 
pot pourrL “The rooms smell 
nice and the decor is very relax- 
ing. They’re very popular.” says 
Susan Dean. Ladbroke’s Drago- 
nara Hotel in Leeds has a 
women-only floor in pretty, 
muted shades. 

Annalina McAfee 

4 ■** 

Z Jr i 

-v... 4 

One frequent female traveller 
who would not take up the spe- 
cial treatment option is Christ- 
ina Smith, owner of a £lm-plus 
shop, restaurant and property 
business in Covent Garden. Pas- 
tels and pot pourris are not her 
style, although she does 
appreciate an awareness among 
restaurant staff of the special 
needs of single people dining 

“You don't seat single people 
in Siberia, out of the way. The 
ideal place is in the centre 
where they can see what's 
happening but they aren't 
exposed to people coming into 
the restaurant and seeing them 
as single people." 

Christina Smith, who has 
visited China more than 30 
times, even expresses the 
minority view that business 
travel can be easier for women 
than for men. "in the early days 
when I visited China it was a 
positive advantage. There was 
an awful time when guests were- 
nicely ensconced in their rooms 
and hotel staff would bring in 
another guest saying ‘I hope you 
won't mind sharing your room'. 
Because I was a woman that 
didn't happen." 

She also believes that women 
are better equipped emo- 
tionally for life on the road. 
“Women can look after them- 
selves more easily, they’re less 
lonely and they don't feel the 
necessity to go out on the town." 

But the experience of both 
Crest and Ladbroke testify to an 
enthusiasm for the “gentle 
touch" in the fabric of their 
hotels. Repeat bookings are 
common- ‘They’re very femi- 
nine looking rooms,” says Susan* 
Dean of Lady Crest “And 
they’re very popular." 

Indeed the extent of their 
popularity has takes Crest by 
surprise. “We’ve got quite a few 
men who tike to stay in Lady 
Crest Rooms,” she says. 


! iVV 

When nothing but the best 
will do phone Carole Green 
on 0733 502598. 

Cook SXmtfmm 

Quite amply the best Business Travel Service in the world. 




One of the world’s best hotels, 


Shcmorila hole*! 


u ... . 

-Financial- Times Thursday Majr 21 . 1987 




More comforts for top people 

- ’ w 

-,-v V 

THE BUSINESS traveller Is, Dot 
surprisingly, being assiduously 
wooed - by Britain's . top hotels. 
After is the business 
traveller who forms the bulk of 
. the market for most hotel chains 
during the week and it Is. essen- 
tial, therefore, that all efforts 
are made to attract business 


This wooing can take a variety 
of forms: , 

• Hyatt Hotels has a Gold Pass- 

port programme to cosset the 
frequent business traveller, 
Some 20 additional services are 
offered for holders _of the Gold 
.Passport — ranging from cheque 
cashing for up to $250 through to 
delivery of room service break.-, 
fast within. 10 minutes of the 
time requested, or else reccrv- - 
ing it free. • ■ > ■. . 

• . The ' newly refurbished ' St 
James Court -Hotel in central 
London lias an “ Action Line " . 
offering what It claims is a com- 
plete problem solving service, 
such as tickets for top shows or 
picking up a chemist's prescrip- 

• Crest Hotels offers the Heal- 
thy Executive Breakfast — a spe- 
cial meal aimed at the weight- 
watching business traveller. 

• The Regent International 
hotel in Hong Kong has two 
international direct -dial tele- 
phones in every room— plus a 
third extension in the bath- 

• Ladbroke Hotels have created 
-new Plaza floors which feature 
a hostess for each floor who 
greets guests with a. glass of 
champagne. - 

• Holiday Inn offers frequent 
business . travellers who are 
members of its Club Europe 
extra features such as a trouser 
press, hairdryer. luxury toilet-, 
ries, and larger, thicker towels 
in each room. 

The. list of such perks is 
niw»rmt endless. and- hotel man- 

agements pride themselves on 
thinking up new ways to keep 
the business traveller's custom. 
“Comfort -and efficiency is not 
enough for today’s frequent 
traveller." points out Mr Peter 
Brainch, . .sales, and marketing 
vice president for Coptborne 
Hotels, part - of the British 
Caledonian group. “ The hotel 
•must . provide a memorable 
experience .so as to. create the 
desire to visit it again.” 

Some business travellers, of 
course, feel that the giant inter- 
national hotel groups can never 
offer the right level of personal 
' service. They, prefer instead the 
more, discreet] charms of up- 
market clubs {such as the St 
James club in London and 
Paris, owned by international 
businessman .- Mr . Peter de 
Sava ry. 

- -Such wooing 1 of the business 
traveller, however, was given a 
knock last year by the slump in 
visitors from North America, 
concerned at potential terrorist 
attacks in Europe. . 

Horwath & Horvath, the hotel 
industry consultants, report 
that hotel room -occupancy last 
-year for the UK as a whole was 
some 3 per cent down on the 
1985 level London's occupancy 
rate was some {7 per cent down. 

. However, while the total-num- 
ber of visitors fell by A5 per 
cent last year, in comparison 
with 1985, visitor spending was 
the same as 1985's record levels. 

Mr Jonathan Bodlender, Hor- 
wath & Horwath’s managing 
director, believes that “ the 
average room occupancy rate 
for 1987 is likely to recover, bar- 
ring any major economic down- 
turn or resumption of terrorist 

He also points out that 
“.hotels achieved healthy 
increases last-year in average 
room rates — up by 13 per cent 
for the UK as a whole, with 

hotels outside London showing- 
greater increases.” 

Optimism In the hotel indus- 
try remains high, in spite of last 
year's problems. Major hotel 
building programmes are being 
undertaken- .all over .Europe, 
buoyed up by a recent forecast 
from the European Travel Com- 
mission of a 5 per cent Increase 
a year until 1990 in the numbers 
of visitors to Europe: 

Expansion in Europe is the 
goal of a number of major inter- 
national hotel chains. Regent 
International. Hotels, based in 
Hong Kong, Is looking for sites 
in Hamburg, Frankfort, Brus- 
sels, Paris and London— with 
the latter being a high priority. 

Regent was chosen last year 
by the Institutional Investor 
magazine as the “world’s best 
hotel group.” Although it has 
had a relatively low proflle so 
for in Europe, it is one of the 
leading chains in the Pacific 
atm countries and now has 15 
hotels in nine countries — 
including the Beverly Wiltshire 
in Beverly Hills and the stately 
Breidenbacher Hof in Dussel- 

Mr Robert Borns, its presi- 
dent, says that he could u count 
28 places where one could put a 
Regent hotel that would be the 
first or second-best in a given 

He adds that “ there are 
various criteria when you are 
dealing with the upper end of 
the business market, as we do. 

We cater to a non-rate sensitive class of hotel outside the US— 
business visitor, and this while businessmen travelling to 
usually means being located in the US and staying in Holiday 
a city that is a major business Inns became disillusioned. 


■ Holiday Inns, 

The company's, response has 
world's been to create a new class of top 

largest hotel chain with almost hotels called Holiday Inn 
1,700. hotels and more than Crowne Plazas. Already several 
300,000 guest rooms in over 50 are open in the US and the first 
countries, is adopting a dlffe* |q Europe was opened in 
rent tactic to woo the business Amsterdam earlier this year, 
traveller. This is being followed this 

The company was founded in month by the refurbishment of 
the US in 1951 and developed Manchester’s famous Midland 
throughout the 1950s as a value- Hotel into a Crowne Plaza, 
for-money motel chain which Mr S igi Bergraann, managing 
took advantage of the expanding direct or for Holiday Inn in 
mter-stete motorwaysystem xn Europe . Middle East, and 

the US. Through franchising, Africa, says that 80 per cent of 
toe company grew rapidly in toe total occupancy comSs from the 
60s and 70s to emerge as the «.h n r»«., K 


*’T***w*'-*-‘ - 1 — — * 

60s and 70s to emerge as the 
major hotel chain in the world. 

However, Holiday Inns* very good standards. 

business traveller " who favours 
us because of our consistently 


success had begun to cause it a 
few problems in recent years 

A new challenge for estab- 

became very di£ 

fose because of the varying stan- is coming from La broke Hotels, 
dards of hotels. In ttae US, for wbicb has /5 >ent 501,16 550,0 °y er 

example, the American execu- 
tive would not normally co ti- 

the last two years on refur- 
bishing its key hotels to bring 


■Jftf ; 

rider staying in a Sy hn them up to the standards 
becauseof its down-market expected from the international 

image and facilities. 

In Europe and many other 
countries, however, Holiday 
Inns are a fairly up-market type 
of hotel well suited to the needs 
of the travelling businessman. 

The problem was that Amer- 
ican executives travelling 
abroad where reluctant to book 
into Holiday Inns— not realising 
that they were a very different 

business traveller. 

Ladbroke's new jewel in its 
crown, moreover, is likely to be 
the Langham Hotel in Regent 
Street— acquired from the BBC 
for £26m last year. 

The business traveller, of 
course, expects nothing but the 

David Churchill 

Glyn Gcnin 

Mr Kenneth Boone and members of his staff at St James Club, Parts 


was invented on a train. 

John Dankworth 
composes music on trains, 

Peter Barkworth 
reads scripts on a train. 

This advertisement 
was conceived on a train. 

The only thing 

ever created in cars is a jam. 



„ , Atale 
of the unexpected. 

Alitalia is one of the mast 
successful airlines in the world, with 
capacity uphya remarkable 50^1 since 

1979. It is now- the fourth largest 

European airline in terms of turnover; 
and the third largest in terms of profit. 

With 98 aircraft worldwide. 
Alitalia has one of the largest and most 
modern fleets of any other airline in 

This staggering success story is 
reflected in the UK which, in 1 986. 
had its third successive record year. 

1987 sees UK capaciry increased 
vet again, with new daily flights to and 
from Milan, more seat. available to 
Rome, and extra flights, from Istjuly. 
being introduced to Pisa and Bologna. 

New comfortable and spacious 
seating, designed by Italy's famous 
designer TrussardL has now been 
installed on most aircraft, and a recent 
magazine report showed that the 
quality of wines served onboard 
Alitalia was amongst the best of the 
manv airlines surveyed. 

1987 also sees Alitalia reaffirm 
its commitment to the business 
traveller with the introduction of new 
services designed to further improve 
the product. 

When you. the business traveller, 
want to fly to Italy with 'that certain 
sense of style; fly Alitalia . 

Alitalia elegante Alitalia 


Lots of airlines 
fly to some of 
these places... 

hut only one 
flies to all 
of them. 

LONDON (Gatwick) 
LONDON (Heathrow) 



s • • 










This year Dan-Air 
scheduled services will be flying 
more passengers to more 
destinations than ever before. 

With more routes, new 
aircraft and increased frequency, 
no-one offers you more than 

For more information on 
Dan-Air’s Regular Scheduled 
Services, call Dan-Air on: 

London area: 01-680 1011 

Newcastle area: 091-261 1395 

Rest of UK: 

LinkLine 0345 100200 

We’re going places 

Financial Times Thursday May tt 18ff7 



The uftfmofcs travel Incentive? The newly re-furbtehed Queen Elizabeth 2 and BiitWiAInMj* Concorde. Cniwd offer one w«y lint 
crossings hi the QE2 with the other by Concorde for less Own the single supersonic are 

Incentive travel 

Rewards of corporate life 

up-market weekend break holi- 
day package launched earlier 
this year by Travelscene, part of 
the Mecca Leisure Group, to 
capture the Cast-growing indi- 
vidual business incentive mar- 
ket. Its emergence is typical of 
the eQbrts now being made by 
the UK travel trade to promote 
incentive trips since these offer 
greater added value for the 
operator than the usual mass- 
package holiday market 
“We are finding that many 
more companies are seeking a 
different and more professional 
approach to the holiday incen- 
tive market," points out Ms Jo 
Olliver, marketing director for 
Classic Holidays. 

“ Increasingly these com- 
panies do not only want an 
incentive package that involves 

over 50 or so couples all travell- — 

ing together but are looking far Sown 
the one off’ special ' prize,” she 

Moreover, the strain of corpo- travel 

Sovereign of the Seas Is expected to be In oerrice for the Royal Caribbean cruise line In 1988 

rate life— especially in finan- dealers. 

incentive for business has taken off drama- incentive manager for Princess 
ti rally as a result of an aggros- Voyages, part of the P & O 

cial circles post Big Rang— has Mr Edwin Ackers, managing sive marketing campaign over group, says that “some 15 per 
lead to more incentives being director of Compass Travel the last two years," says Ms cent of all our cruising berths 

aimed at weekend breaks only, which was split off from the Jennifer Brown, UK manAger of now ^ carry incentive passen- 
since this is the ywayiwmtn tim e Thomas Cook group some 18 the Royal Caribbean cruise gers.“ 

spend away from the office. Incentive 

conference Demand for cruising is so 

many managers feel they can months ago to concentrate on line. • One new trend in incentive 

spend away from the office. incentive and conference Demand for cruising is so travel is the shorter time -scale 

annroaeh is to choose travel, reports that revenue has peat that a new liner for Royal demanded by companies. Mr 
too 1 hXl£K8 ? Mtt» GebSS increased by about '50 per cent Carfobteta.- called Sovereign of David Hackett, chairman of The 
vi n ParisFor th e n ew ly-reftir- over the past year. “Even for the Seas, is currently under con- Travel Organisation, specialist 

V ID mis or UB DEWiy-iww; .... tn AUhnitri, < n «rt.fltn> Armnimrc nA Hit Ant 

Classic approach is to choose travel, reports that revenue has 
too hotels— -such as the George Increased by about '50 per cent 

hished Grand in- Florence— and the .Industry as a whole, struetion in France. “ Although 
baUdaSSor-made package for. increased re venne over the past Sovereign of foe Se as g®*® 1 ?* 

each taceattretrip. Such pack-' 12 months is In the region of 25 sail on its maiden voyage until typically had lead times of more 
each MWM mp. ouenpara- w „„ nest January, some 4,000 incen- than 12 months. “ Now projects 

Incentive organisers, points out 
that in the past projects 
typically had lead-times of more 

aeel therefore normally per cent," he says. next January, some 4,000 incen- than 12 months. “ Now projects 


chauffeur-driven transfers from just how important motivational Pr 

travel aid overseas conference %, e Qujbb , aD b „ 

ific short-term goals and 
to achieve the best value 

WMasata* nw ESE&SF- 

sicis able to negotiate fevour- ■“ US and 

able hotel and an: rates. “ This and teamwork among the work- 132 Hhi£J!E SSi£EL£Sii 
provides our clients with an up- force,” he adds. 

market incentive product that is wr_n«i»iH a^mh nhaiv-vnan n ^ leisure complex in 

uniitelv to be arranged cheaper Arscott.^chamnan of Barbad6s, for example, is espe- 

A key point to bear in mind 

relaxed lifestyle. The Heywoods when organising a Conference 
hotel and leisure complex in or travel trip is tbe potential tax 

unlikely to be arranged cheaper jsaroaaos, ror example, is espe- implications, since in theory 

either in-house or by alterna- 5* e British Association of Hotel cially favoured by British com- everything a employee receives 
five incentive operators,” points Representative* and sides dire- panies because of the range of as a result of employment Is 

uve UH.CUUVC ujiciowij, ^ <*tnr fnr the New Otnnf Pnr>ifir — >ri 

out Ms Olliver. 

Companies that have already 

ct°r for the New Otani Pacific facilities, especially for confer- liable for UK taxation. The 
hotel chain, also points out that ences. Heywoods is operated by Inland Revenue, to help cora- 
“ il !5 entiV L« ? rawel “ J* 1 ®. on ® Copthome Hotels, part of the panies deal with this problem in 

taken advantage of such Classic single growth area in the hotel British Caledonian group. 

advance, has set up a special 

packages include those in the industry— whether it be for the Cruising in general is tradi- unit to 'advise prudent corn- 

car, pharmaceutical, and retail, weekend packages 

industries. arrangements costing up 

While Classic Holidays are at “.WO Pe* person per week, 
the luxury end of the incentive The key factors influenc 
market the growth in incentive the choice of a conference 
travel overall has been rapid in incentive travel destlnat 

for tionally a favourite form of holi- panies on what the tax liabili- 

day for the British and there- ties could be. 
fore is becoming more popular 

The key factors influencing for incentives. Mr Colin Cooper, 
the choice of a conference or . ■ ' ■ ■ 

DavW Churchill 



recent years. “ While some appear to be the hotel facilities, 
areas of the tourism and travel price and the time taken to 

Industry have had to face diffi- 
cult times, often through over 
zealous price cutting to the con- 
sumer, incentive travel has 
appeared on the scene to offer 

reach the destination. Gambling 
facilities, for example, are of 
little interest to UK incentive 
trippers, although in the US this 
is considered a major factor in 

regular custom and to be laden choosing a travel location. 



with fat profits,” points out a 
recent report in Travel and 

The most popular destina- 
tions for incentive and confer- 

Tourism Analyst, published by . ence trips vary - considerably, 
| the Economist Intelligence according to factors such as 

budget purpose of trip, and the 

“ Yet the incentive travel con- tastes of the target audience. 

cept remains widely misunder- Short-haul destinations 

stood by both actual and poten- Europe are still the favourite, 

fial users as well as those who accou n ting for eight out of every I 

do and could supply certain ele- °f trips according to a 

ments of the final product" it 

The exact size of the incentive 

survey by the specialist maga- 
zine Promotions and Incentives. 
Paris is the most popular 

"5 ^ destination, making France the 

overall for incentive 

enoiract that Uips. ... 

m°st researcher, that ^ shortJlauJ is 

x U-* rara_ cuui truaiu id puuiucu i 

because of the shorter travel 

panies in this way last year. 
Research has also indicated 

time taken — and the lower costs 
Involved— there is also a clear 

that about a third of the top ^towanta long-haul 

destinations. This is a^nse- 

Among those that had used 
incentive travel, nearly three- 
quarters of such companies 
used it to motivate their own 
sales forces while half also used 

guaranteed sun in the spring 
and autumn, when most incen- 
tive trips take place. 

The Caribbean, in particular, 
has become especially popular 
for incentives. "Our incentive 

The best 


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Financial Times Thursday May 21 1987 

■•Til* L»J I 

big spenders 


tions are, for many business 
travellers, one' of the main 
reasons for their journeys 

Surveys have shown, for 
example, that about one in 
every five international busi- 
ness traveller is travelling to 
attend a conference or exhibi- 
tion. Within the IIS, business 
travel to conferences and 
exhibition is harder to calculate 
but clearly is an Important part 
of the business travel industry. 

' This reflects the increased 
popularity of conferences' ahd 
exhibitions in the 1080s as a' 
major wxrfcyflng tool— a means 
of communicating a message to 
a target audience, .be they a 
company’s own employees or a 
world-wide convention of pro- 

fgttjnnnh. ■ 

The exacfsize offhe market is 
open to different interprets 
dons. The amount spent on 
exhjUbitibns in' 1965, for 
example. Is calculated at £192m. , 

A 1963 study of exhibition 
fedlltieB in London, moreover, 
puts the figure for expenditure 
on trade feirsand exhibitions at 
more than £900m. 

However, ' ti»e International/ 
Passenger Survey retarded that 
overseas bnsiness travelldzs in. 
1905 spent some £74m on exhibi- 
tions in the UK, although ack- ' 
nowledging that this was shar- 
ply np on the 1983 total of £44m. 

The British Tourist Author- 
ity's business travel department 
has recently calculated- that 
revenue from . British -and 
foreign exhibitors could well . 
exceed Qbn by I960, with , over-- 
seas exhibitors and dttton . 
generating up to £200m. - 

Expenditure on conference s ; 
Is for less .precise, since it is 
difficult <to. -calculator exaetiy.' 
what to include^ There are. for 
example, over -4,000 «rgampa* 
tions In the UK which hold regu- 
lar conferences, ' apart ^ from 
commercial companies. Some, 
estimates, therefore, put the 

amount spent ' on UK confer- 
ences at about £900m a year — 
although this could well be on 
the conser v a tiv e side. 

Even if precise statistics are 
not available to show the growth 
in popularity of conferences 
and exhibitions in the UK, there 
Is- no doubt that demand is 
extremely buoyant ' 

“So useful are seminars and 
small conferences that we are 
putting on more and more of onr 
own.” points out Ms Victoria 
Tomlinson, marketing manager 
for the Arthur Young manage- 
ment consultancy and 
^accountancy ~f!xm. “It is an 
excellent way to provide a ser- 
vice to onr clients on, for inst- 
ance, the range of new legisla- 
tion in financial areas.” 

Mb Wendy Griffiths, a special- 
ist communications consultant, 
also points out that “busmen 
presentations are an important 
area: of corporate communica- 
tions such as sales, conferences, 
product launches, and press 
conferences.” She adds that 
“instinctively businessmen opt 
for live presentations because 
they know that personal com- 
munication works.” 

. Moreover, conferences are 
^glso Increasingly being used as 
"a means of Internal communica- 
tions. “Organisations like Brit- 
ish. Airways, ICL, Royal Mall, 
Ford and British Telecom have 
. all accepted that internal com- 
munications to their own 
employees are at least as impor- 
tant? as- external communica- 
. tions, " points out Mr Peter Bar- 
ners-Pncem chairman of Spec- 
trum . • Communications, a 
■porfallst conference produc- 
tion company* 

“A big competitive opportun- 
'ttftils missed if a new product is- 
'.launched or . high standards of 
jmryfee. advertised Jf staff are 
, not fully informed in advance of 
the changes that -are necessary 
and then trained and motivated 
to meet .those standards,” he 

Unlike other airlines, Garuda 
Indonesia places “Executive Gl a ss ” 
guests in the roomy nose of our 747s. 

Where the others usually have 
their First Class. 

The extra space and comfort seem 
to be very much appreciated. 

And that isn’t the only similarity 
to First Class you’ll find on Garuda’s 


The exhibition and confer- 
ence sectors in the UK are frag- 
mented industries with numer- 
ous small operators. There are, 
for example, some 600 mainly 
small exhibition organisers in 
the UK— yet most major exhibi- 
tions are organised by just 20 or 
so companies. 

A recent survey by the British 
Exhibition Venues Association 
of exhibition organisers found 
that London is still the prefer- 
red location for trade or indust- 
rial exhibitions, despite the suc- 
cess of Birmingham's National 
Exhibition Centre. 

Most grouses from organisers 
covered in the survey were 
about catering and the lack of 
adequate car-parking facilities, 
although these- opinions were 
only expressed by a minority. 

Mr David OTBelme, managing 
director of the Cahners Exposi- 
tion Group (a subsidiary of Beed 
International), points out that 
“the traditional image of exhibi- 
tion organisers as ‘hit and ran* 
merchants is oHawg in g and the 
shows of those who. earned this 
reputation are dying.” 

Moreover, he believes that 
“there is a lot of competition in 
the industry now ana a shake- 
out is taking place; but exhibi- 
tors are increasingly deman- 
ding effective promotion and a 
professional approach and the 
industry at Ian seems to be 
reaching some kind of 

Demand for UK exhibitions 
and conferences has also been 
helped by the improvement and 
development of facilities in 
London and the rest of the UK. 
In London last year, for 
example, the new Queen Eli- 
za be thn conference centre was 
opened at a cost of £44m. 

At Earls Court and Olympia, 
plansfora new £3&m exhibition 
hall have been unveiled— to be 
built by 1990— and this Septem- 
ber a purpose-built conference 

centre at Olympia 2 will be 

Wembley has also joined the. 
move to upgrade facilities with 
a new £5£m building opened 
earlier this year which, it 
claimed, “brings exhibitions ont 
of the concrete sheds of the past 
and into the comfort of the 20th 

Outside London, the industry 
has seen the opening of the 
Aberdeen Exhibition and Con- 
ference Centre and the Greater 
Manchester Exhibition Centre 

In Birmingham, where the 
international airport has 
already been developed as an 
important regional hub for 
inter-connecting flights, work 
has started on the £107m Bir- 
mingham International Conven- 
tion Centre. 

One growing trend, moreover, 
has been the expansion by 
major hotel chains of confer- 
ence facilities, reflecting the 
demand for smaller, more flexi- 
ble meetings. 

Thistle Hotels, for example, 
has moved to capitalise on this 
trend by setting up “private 
sanctuaries" within 14 of its 
leading hotels for executives to 
hold special meetings. 

These facilities, termed 
“Boardroom” by Thistle, have 
been designed to keep in with 
the architecture of the hotel and 
are planned to accommodate 
groups of between 15 and 20 

Although the UK conference 
snd exhibitions industry last' 
year received a scare from the 
fears of North Americans to 
come to Europe because of 
terrorism, such concern is nowj 
seen as only a minor “hiccup” to ; 
the -sector’s continued growth- 
into the late 1960s and beyond. 

DavM Churchill 

“Executive Class.” 

Hie standard of service is simply 
a revelation. 

And the Indonesians are gentle, 
gracious people. 

They have no word for “foreigner”. 

Only “guest” 

And this concern for visitors 
shows in the way you are looked after 


cities, many of which have suf- 
fered big reductions in their 
industrial bases during recent 
years, ail regard business travel 

as a vital economic growth 


Cities throughout the country 
have launched marketing 
drives, and in many cases estab-. 
listed special departments, to* 
sell their rival attractions to the 
business traveller in a strongly 
competitive national and inter- 
national market 

Mach of the income generated 
from business travel is associ- 
ated with the conference mar- 
ket, and the range of smaller 
business meetings held outside 

Birmingham's drive to attract 
the business traveller is 
spearheaded by its Inter- 
nationally-famous National 
Exhibition Centre — one of the 
most extensively used exhibi- 
tion complexes in Europe. 

The L2m sq ft of exhibition 
space at the NEC, located on the 
outskirts of the city beside Bir- 
mingham Airport, will be 
increased by 20 per cent in 1989 
to meet growing demand. A year 
later a £122m International Con- 
vention Centre will open in Bir- 
mingham City Centre. Alongside 
this Hyatt, a leading US confer- 
ence hotel chain, is developing 
the luxury Hyatt Regency Hotel 

Another new hotel the 215- 
room Copthorne, opened in Bir-. 
mi p ghnm city Centre last month 
and a farther six hotel projects 
are in the pipeline. 

Birmingham Convention and 
Visitor Bureau calculates that 
business travel will be worth 
£250m to the area this year. It is 
a trade which has had a striking 
impact on jobs in the West Mid- 
lands— a region which suffered 
a severe decline in jobs when 
recession hit its staple 
engineering industry. 

A study last year showed that 
about 70,000 jobs in the West 
Midlands are secured by tour- 
ism. Before the NEC opened it is 
estimated that this was fewer 
than 20,000— and possibly as low 
as 10,000. 

Another study indicates that 
Birmingham's image as a busi- 
ness centre is also improving. 
Since 1982 there has been, 
according to the research, a 25 
per cent increase in positive 
attitudes towards Birmingham. 

The city came top of a list of 
locations regarded as good 
places for business meetings 
and conferences, and 60 per 
cent of those interviewed in the 
survey said that they had either 
held a meeting in the city during 
the previous 12 months, or 


But 100 miles away uf> the M6. 
Manchester is challenging hard 
to persuade Birmingham’s con- 
ference-related business mar- 
ket to tr avel farther north. The 
city's G-MEX centre opened last 
year, and officials say it is - 
already attracting some busi- 
ness away from Birmingham 
and the big new conference and 
exhibition complex at Harro- 

Much of Manchester’s other 

Provincial centres 

Improving the 

Overseas conference visitors 

80 Cm 






Souca-. BuUnsM Travel 

■business travel trade stems lished a specialist marketing 
from its regional capital role in unit— the Greater Glasgow Co li- 
the North West About 30 vention Bureau— which is s pen- 
foreign banks have been estab- ding £575,000 promoting the 
lished in the city during the past area to the conference and 
10 years and it accommodates exhibition industry at home and 
350 international companies of overseas, 
varying sizes. An important Ur Eddie Friel, chief execu- 
asset for the city’s business tive of the tourist board, says 
travel planners is Manchester that In the past conference acti- 
Airport, from which 38 inter- vities in Glasgow were not orga- 

national carriers operate. nised on a corporate basis. 

Like Birmingham, Manches- Various organisations involved 
ter has a major hotel building tended to operate inde- 
programme in progress. About pendently and this presented a 
1200 new rooms will be added fragmented approach to the 
to the city's hotel stock this year, market place. 

Tourist officials believe the The Greater Glasgow Conven- 
city’s location half-way between tion Bureau would now offer a 
the Sonth East and Scotland one-stop service for conference 

nised on a 

possible location they no longer 
have to engage in a massive 
paper chase to secure the 
information required.” 

Facilities offered by the 1 
bureau include venue selection, 
accommodation booking ser- 
vice, civic hospitality, social 
arrangements, tourist informa- 
tion and multi-lingual guides. 

A survey carried out in 1983 
on behalf of the Greater Glas- 
gow Tourist Board showed that 
while business travel accounted 
for 73.7 per cent of hotel nighta 
spent in the city, business visi- 
tors apparently came out of 
necessity alone. “ The buslness- 
240 man coming to Glasgow stayed 
only as long as was absolutely 
necessary and then left by the 
first available means of trans- 
-tan port, which was usually the Lon- 
don shuttle,” says a board 
report on business travel. 

Since then the tourist board 
has engaged in an extensive 
120 strategy to market some of Glas- 
gow's attractions, in an effort to 
persuade visitors to stay longer 
and come more often. This has 
Involved publicising the fact 
- Rfi - that Glasgow has some of the 
finest Victorian architecture in 
Europe, houses eight of Scot- 
land's top 20 tourist attractions, 
0 and is Che only British city 
except London to have four 
national arts companies — Scott- 
ish Opera, Scottish Ballet, the 
Scottish National Orchestra and 
ati _- the Scottish Theatre Company. 

Equally importantly, the 
■n£n b oard has publicised Glasgow's 
the international airport. Its exten- 
“j sive range of hotel accommoda- 
tion and its new purpose-built 
' a u conference and eriiibition cen- 
tre and other venues. 

Several major events during 
the coming years are set to 
“JL. increase Glasgow’s share of the 
tourist market Next year it will 
j stage the Garden Festival, in 
1990 it becomes European City 
o o f Culture and it has just been 
th» selected to stage the World 
Orchid Conference in 1993, in 
the face of competition from 
fern long-established conference 
“ cities including Frankfort and 
_„l e Hanover. 

makes it a natural centre for and exhibition organisers, 
business meetings. They also “When conference organisers 

regard Manchester’s distance are considering Glasgow as a Alan Pike 

from London as an advantage— — — — 

market in the Nozlii Weft is 

unchallenged. A hotel improve- vv Y T\KT ri T\T7 

ment programme has also been Vl/I 111 I .1 1 W I I IF 

taking place in Liverpool, and T T x/A\AJJLy f f AJL/Lf 

lilies have been created in the 
city’s award-winning Albert 
Dock development 

In Scotland, basin ess travel 
and conference activities are 
important to the economies' of 
the major cities of Edinburgh. 

Glasgow - and Aberdeen and 
elsewhere. Hotels - throughout 
Scotland give high priority to 
catering for all types of business 

The Greater Glasgow Tourist 
Board, set up in 1983, has estab- L Quite simply the best Bumness Travel Service in the woridi 



When nothingbut the best 
will do phoneT&role Green 
on 0733 502598. 

Whether you are travelling to 
Indonesia for business or pleasure, 
Garuda can help you better than any 
other airline. 

We can tell you more about 

And with our domestic flights, 
take you more places than anyone else. 

It is, after all, our homeland 

And we are the largest airline in 
the Southern Hemisphere. 

For more information about 
Garuda Indonesia services, and about 
Indonesia itself please contact your 
nearest Garuda Indonesia sales office. 
\bu’ll find we’ll put you first 

Ganida Indonesia 

our business class passengers first 

9 9 9 9 

9 9 




Financial Times Thursday May 21 1987 


Non-stop flights. 

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Telex: 5950232 ROGERS G Thne: GMT 

The best 


When nothing but the best 
will do phone Carole Green 
on 0733 502598. 


COOk Tbwvsll 

Quite simply the best Business Travel Service in the world. 

Executive health 

So many risks 
to be on 
guard against 

FREQUENT business travellers 
are a blasfi lot Content to sink 
into their wider-than-average 
First or Business class airline, 
seat. chauffeur-driven 

limousine and five- star hotel 
room, they believe a business 
briefing is all they need before 
arriving on foreign soil. 

Wrong. If they believe this, 
coming back in the shape they 
arrived is likely to be more the 
result of luck than judgment 
The ill-prepared traveller is 
likely to become a statistic, one 
of the 50 per cent of all Inter- 
national travellers who suffer 
health problems while abroad. 

Travelling is bad for your 
health, particularly in countries 
outside North America, North- 
ern Europe. Australia and New 
Zealand. Insect bites can give 
you malaria, sleeping sickness 
or typhus, contaminated food or 
water can bring on hepatitis or 
if you are unfortunate enough to 
get bitten by an infected mos- 
quito, you could go down with 
yellow fever. This is not a 
pleasant condition to do busi- 
ness in. 

More common, though, diar- 
rhoea. Four out of every 10 

international travellers con- 
tract it abroad, 30 per cent of 
whom will be confined to bed 
and another 40 per cent of whom 
will be so badly affected travel 
plans will have to be resche- 

Then, of course, there Is the 
hazard of sexually transmitted 
diseases (STDs). Coming - into 
contact with high risk indi- 
viduals, suc h as prostitutes 
means STD often follows. 
Forget promiscuity if you want 
to guard your health and life, 
take up something safer, or as 
Mis Etiwina Currie, the UK 
Health Minister, advised, take 
your regular partner along for 
the ride if this is at all possible. 

It is generally unwise to rely 
on your travel agent to advise 
you on health matters. They re- 
gard medical advice as the do- 
main of a doctor, but you may 
find your local GP, too, is not 
conversant with all the tropical 
diseases that lurk in wait 

Malaria may have struck 2J250 
Britons last year bnt that is a 
small number compared with 
the number of GPs in Britain 
and other similarly-sized Euro- 

constraints of home, family and 
work, many people behave in a 
quite reckless, and unchar- 
acteristic manner while abroad, 
exposing themselves to risks 

they would never dream of tak- 
ing at-home.” 

Road Transport accidents are 

the big killers; often from driv- 

ing on the wrong side of the road 
or, as a pedestrian, looking the 
wrong way when mossing a 
road. Where possible therefore 

'salad, fruit and rice are to be 
avoided at all coats. 

ch. lead to such 

Swimming pool and beam complex In overseas hotel 

pean countries. Doctors them- 
selves can be innocents abroad 
too. There is the oft-reported 
story of the British Medical 
Association conference in 
Cairo, when a shipload of 100 
doctors were gripped by diar- 

Nor is it always wise to rely 
too heavily on overseas medical 
advice. A hotel doctor could 
prescribe aspirin for fever and 
headache, not realising you are 
suffering from early stages of 


malaria So who can the busi- 
ness traveller turn to? The 
answer is nobody but himself. 
By far and away the biggest 
bealth hazard is accidents, 
which easily overshadow any 
exotic infection you may catch. 
According to Dr Richard 
Fairhurst, chief medical officer 
of Europ Assistance, business 
travellers "are under pressure 
to complete the business deal at 
any cost, to press on regardless 
with their itineraries, and to use 
dangerous short cuts to achieve 

"Because of these pressures, 
and the absence of the usual 

pressure wl 

Diseases are preventable if 
the business 'traveller takes 
general precautions. The man- 
datory " vaccine requirements 
are not enough as they only cov- 
er half a dozen diseases: hepati- 
tis, polio, typhoid, tetanus, 
rabies and cholera.. 

The optional vaccines record 
mended by immunisation cen- 
tres are for personal protection 
and should also be taken. 

The other advice proffered to 
travellers. " Be . carefol with 
'food and- water" is worth 
following too, but rarely is. 

“Its easy to be lulled into a 
false sense of security by being 
in a five-star hotel " cautions Dr 
Richard Dawood, editor of 
Travellers' Health: How to stay 
healthy abroad. "The disease- 
ridden flies don't know it's a 
five-star. property and that they 
should stay away.” 

Has the - chef washed his. 
bands? It may be a prestigious 
hotel but it is still the locals in 
the kitchen. Has the food been 

Bottled or canned drinks 
bearing well-known brand 
names are safer than quenching 
your . thirst with water, as 
one budget-conscious business 
traveller found to his cost when 

he opted for hotel tap water to 

take an aspirin with rather than 
splash out the £3 for a bottle of 
mineral water from his mini- 
bar. The same caution should 
embrace ice. ice cream and 

Bnt business travellers, it 
seems, do tittle to help them- 
selves. “ When eating on an ex- 
pense account the temptation Is 
to get your money’s worth. 
Dawood believes. “ It's a par- 
ticularly British phenomenon to 
finis h everything on your plate.” 

Accepting hospitality abroad 
is best avoided but diplomacy is 
needed. Outright refusal may 
spoil your chances of clinching 
the deal. Dawood suggests 

pleading illness firskas it's an 

acceptable excuse. He speaks 
from experience, having picked 
up amoebic dysentary as a re- 
sult of accepting hospitality in 
West Africa. 

refrigerated? And how do you 
used to 

know that the water 
wash the salad is safe? 

- Disease in the poor, hot coun- 
tries is very much hygiene-re- 
lated and there ere simple 
ground rules to follow. Select 
dishes that have been handled 
the least Food that has been 
well boiled, has come out of a 
packet or from a sealed can are 
best but shellfish, vegetables. 

One last piece of advice. It is 
wise to choose your travelling 
and business companions 
carefUUy as they may come in 
handy for the odd pint of blood 
should you need a transfusion. 
“ Outside Western Europe, 
North America, Japan and Au- 
stralasia, adequate facilities for 
screening donated blood for the 
AIDS virus, hepatitus, malaria 
and syphilis are non existent 
and people are often expected 
to find their own donor.” 

Gillian Upton 
Deputy Editor Business Traveller. 

•Ttneltoar Health pufcUtfmd by CMMi 
UnKwsIty Plan and now updated Iter 1387 
(POp«t»Ck £6.B5y 

For the hard-pressed 

t.tkf EVERY successful and 
surviving species Travelling 
Man has had to adapt to cope 
■with modern times. In the days 
of Empire he could afford to 
travel with almost his entire 
household needs in tow. 
Leisurely ships and powerful 
trains, as well as a ready supply 
of those long-vanished luxuries, 
runners ana porters, ensured 
that neither weight nor quantity 
was ever any barrier to a gentle- 
man continuing to live exactly 
the ways he always had. 

No matter how far-flung the 
corner, how inadequate the lo- 
cal corner shop or how unsuit- 
able the climate, the trick for 
the classy traveller of old was to 
behave exactly as if he were at 

Things are very different to- 
day. Today's Travelling Mart has 
had to learn to : travel light. Re- 
stricted for baggage, pressed for 
time, susceptible to back in- 
juries, Travelling Man is end- 
lessly balancing comfort, effi- 
ciency and necessity against 
lightness and portability. 

Fortunately for our hard- 
pressed modern traveller new 
technology has come to his aid. 
Today he could travel around 
the world with some 20 different 
gadgets to help him on his way 
and still (if he could be disci- 
plined enough with the drip-dry 
shirts and the changes of under- 
wear) walk on board his jet with 
just a holdall in the hand. 

The ingenuity of manufactur- 
ers to make every conceivable 
gadget in smaller and lighter 
packages seems to know no 
bounds. There is still no radio 
better for those marooned in 
foreign parts than the Sony IC 
7800 but if you are not too flissy 
about reproduction and if you 
do not always insist on being 
able to get every available sta- 
tion then there is a host of cre- 
dit-card sized radios to .choose 
from— take the Sony FM/AM 
mini-radio. It comes with re- 
chargeable batteries, costs just 
£49.95 and will fit into your 

The alarm clock is an essen- 
tial to the weary businessman 
who needs be awake for the 
business meeting he has come 
all this distance to attend — once 
upon a time he had to carry a 
little folding alarm clock. Today 
that too, comes in a tiny pack- 
age no bigger than a credit card 
and just for good measure most 
of them operate as calculators, 
too. Casio do a good one at just 


If oar hard-pressed business-' 
man is worried that he may 
sleep on he could opt instead 1 
for the Braun voice-controlled 
travel alarm clock. True, it is a 
little larger, being a small black 
square box, and true, it stops 
making a noise when you yell at 
it but snooze on and it will 
sound off every four minutes 
until you are finally obliged to 
wake np and switch it oft Most 
goodLe lectrical shops sell It for 
about £20. 

Y(X»tb mice WHEW WE AfcfclVE Tfftf) 
MV suit if omem-v 

Oar baggage-conscious busi- 
nessman would be wise to look 
for gadgets that combine more 
than one fiinctlon— like the cre- 
dit-card sized alarm clock that 
doubles as radio, there is also 
Seiko’s RC1000 dlgital-watch- 
cum - travelling alarm - mini- 
computer terminal. When 
you’re fixing deals out in 
Tokyo It can deliver up to you 
telephone numbers or diary 
dates from your desk-top or 
home computer. Buy it from 
Selfridges, London, Wl, for 
about £120— it will work in with 
Apple, IBM personal computer, 
the Sinclair Spectrum, Acorn, 
Tandy 100 and Epsom's FX-8 

If you really cant function if 
you’re for from a telex machine, 
Ryan sell what they call the 
smallest telex in the world — the 
PX3000 measures just 224 mm 
by 85 mm by 29 mm, weighs 14Vi 
oz and sells for about £480. 

Similarly, the businessman 
who feels insecure when far 
from a photo-copier can now 
carry his own portable version 
around with him. It isn't, of 
course, as large or as useful as 
the heavy, office-based version, 
but for £329 it will photo-copy 
and print out information about 
as wide as a column of newspap- 
er print Find it in Harrods Au- 
dio and TV department 

If numeracy is not our hero’s 
strong point then he might be 
wise to take with him the X- 
changer— a tiny little gadget it 
will obligingly translate pesetas 
into lira, yen into dollars or any 
other currency you feed into its 
clever little system. For just 
£4.99 it could save pounds on 
your bill. 

The logistics of modern 
travelling, not to mention the 
decline in the standards of all 
but the very best hotels, has 

meant that many a modem 
Travelling Man’s most pressing 
problem is . . . well, how to stay 

Braun’s hairdiyer-cum- 
tra veiling iron costs just £15 and 
solves at least two problems In 
one— besides leaving your latest 
hair-cut looking smooth and 
efficient it can, if yon add a 
special attachment to one end, 
turn into an iron of sorts. A good 
laundry will certainly do It bet- 
ter but this is better than 

Security is increasingly a 
problem for our busy traveller 
and there is a variety of devices 
to help protect him and his valu- 
ables. Harrods sell a battery- 
driven burglar alarm called a 
Door Guard— attach it to your 
door handle and it gives a loud 
shriek if anybody should try to 
open the door (£7). John Lewis 
sells a stowaway hanger which 
sports a locked compartment 
where valuables can be stored 

It also sells a shoulder wallet 
(you strap your money round 
your shoulder out of sight under 
your jacket) for £&25, a leg wal- 
let for £5.35 and a waist wallet 
for £3.55 — you pays your money 
and you takes your choice. 

Finally, our hard-pressed 
hero may well feel he deserves a 
■treat, what with trying to be 
bright and punctual, efficient 
and creaseless he can afford to 
pack the odd luxury or two so 
treat him with an elegant little 
hipflask from Fast Forward of 
14a Newburgh Street, London, 
Wl— they do not come more be- 
g niling ty elegant and they'll 
cheer him on a cold and dreary 
day when the plane is delayed 
yet again. 

Although we’ve made over 500 changes 


Luda van der Post 

London Hilton 
On Park Lane 


: And that* the view. Otherwise you’ll see 
1 plenty of differences at the London Hilton 
■ on fork Lane. 

i For a Stan, every worn has been com 
’• plctely refurbished, and we've installed 
: lour new Executive Roots with upgraded 
guest rooms. their own Reception kst-and 
' private lounge serving complimentary 
.. continental breakfast, cocktails and 
• canapes. So staying with us Is even more 
-- luxurious and comfortable than ever 
. before. 

Vbu’Ualso notice the difference in the 
■: wide variety of- places to eat and drink 
i dm we offer. From the spectacular Roof 
Restaurant, where you can dine, wine, 
dance and enjoy looking down on 
London, to the pub-like atmosphere of 
the Sc. GeorgcS Bar; a fate night dance at 
the disco; a Polynesian treat at Trader 
VlcS - or the best of British cooking at 
the British Harvest- everything has been 
given an extra touch of class. 

Next time you come to London, stay 
in one of London S newest hotels - but 
still in the best place. The London Hilton 
on Park Lane. 

for resenvtf&ms, call your travel agent, 
- ‘ Hilton 

any Hilton International hotel or 
Reservation Servtce-in London 631 1767 
and elsewhere In the UK Freefone 2124. 





Extra seats, extra chic. 

Contact your Travel Agent or Air France, 158 New Bond Street London W1Y QAXTeh 01-499 9511. Heathrow AkporL 01-759231 1. Manchester 067-436 3800. Ca/yo Bookings.- 01-897 2817. Prestol: 202423. 

Air France announce increased 

50% more Club Class 
seating an A300 Airbuses 
between London and Paris. 

33% more on Boeing 737s 
throughout Europe. 

Special separate Club 
cabin - extra space, 
extra-comfortable seats. 

One call makes the discovery. 


Financial Times Thursday May 21 1987 


, . i\ 

The US 

fares long before the present 
moves to liberalisation for Its 
XiOndon-Dnblin route, the 

second busiest in Europe, Aer 
Lingus, the Irish national car- 
rier, has introduced program- 
mes for first-class and business 
travellers on its North Atlantic 

The new competitiveness 
from foreign carriers hits US 
airlines when their own labour 
problems and wavering commit- 
ment to frequent-flier bonuses 
make them vulnerable to the 
incursions of imaginative 
appeals to business flyers. 

Aer Lingus business and first 
class fares are *400. to $600 
cheaper each way on inter-con- 
tinental flights, an advantage in 
particular for travellers going to 
destinations other than gateway 
European cities, since they 
would have to change planes, 
anyway- The airline has also 
recently introduced its Emerald 
Holiday, an individualised 
package that, for less than a 
first-class New York-Landon 
return ticket, includes a week's 
stay at famous Irish destina^ 
tions like Dromoland Castle and 
the hire of a Mercedes for the 
period. This takes advantage of 
a trend among American busi- 
ness travellers of combining 
pleasure with business, with, 
nearly a third of ail US 
travellers taking an average 3% 
days to a business trip for shor- 
ter but more frequent holidays. 

Realising that travellers 

seize their opportunity 

would want to stop in Ireland in 

only one direction, the airline 
has a co-operative arrangement 
'with TWA for a direct return 
from London. Aer Lingus also 
provides co-ordinated sche- 
dules with domestic US carriers 
for X04 American cities, in addi- 
tion to Its own flights from Bos- 
ton and New York. 

Such programmes mark a new 
effort by international carriers 
to regain the Initiative lost to 
the. domestic carriers' frequent 
.flier bonuses, which, overithe 
past flve years; have proved to 
be the most successful promo- 
tion in airline history. Now the. 
-international carriers offer fre- 
quent flier credits on domestic 

programmes, while the domes- 
tic airlines are trying to raise 
the mileage for the frequent’ 
flier bonus payouts, a withdra- 
wal that indicates the cost of the 
promotion as travellers build 
np their mileage points. Airline 
revenues / have even been 
affected by the press of 
travellers . cashing, in their 
bonuses, before they expire. 

Foreign airlines gained 
passengers last summer when 
the hijacking scare encouraged 
business travellers to avoid 
domestic airlines. The foreign 
carriers are making a concerted 
effort to keep the new clientele 
by adding convenience to the 
service and comfort that Amer- 
icans feel they have been losing 
on domestic airlines. 

The European carriers have 
been taking advantage of a con- 

■W. --V'v ’ - 

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V/m'jii • 


• Jp> ■ 

; j- l. * . , : 

: 1 

i i ' * * -. t fe 

V vv * 

% . \X- 

v £* * 

The Vista International Hotel o«iaa deluxe accommodation In the 
heart of New York City's financial district and Is located at the foot of 
Cttffi towers of the World Trade Centre. 

tentious period in American 
airlines’ labour relations by 
creating a business class where 
•one might not have existed 
before and providing service 
that approximates first class 
travel. Even Malev, the Hunga- 
rian national airlines, has 
added a business class service 
for its European routes. 

But .US domestic airlines are 
fighting back with more of their 
greatest selling point, conveni- 
ence. With Amercan travel to 
Europe expected to increase by 
at least 10 per cent over last 

year, more airlines want to 
break into the European market 
and so provide inter-continen- 
tal service from more American 
destinations to more European 

American Airlines flies to 
Europe from bubs in Dallas/ 
Forth Worth. Chicago and 
Raleigh/Durham and now goes 
to DusseldorC Munich. Paris’ 
and Tokyo. Picking out-of-the- 
way hubs like Raleigh -Durham 
eases the congestion at major 
airports, which have been 
increasingly taxed by the num- 

ber and scheduling of the air- 

Government efforts to co- 
ordinate traffic have been 
thwarted by the lack of co- 
operation of some carriers, 
which persist in overloading 
take-offs and landings at the 
busiest times of day. 

Such fear of losing competi- 
tive advantage has a healthier 
side. The American carriers are 
also using increasingly sophisti- 
cated computer models to struc- 
ture feres to minimise empty 
seats throughout the day, par- 
ticularly on domestic flights. 
The mix is different on every 
flight, even for the same 
destinations in an effort to 
accommodate every full-fere 
business flyer while filling’ 
therest of the plane with dis- 
count or coach travellers. 

Much of the attraction of 
adding European flights comes 
from the perception that with 
the fell in the value of the dol- 
lar, American businessmen will 
be travelling abroad in search 
of new markets. If Americans 
need to travel more just when 
they can afford it less. Inter- 
Continental Hotels is offering a 
“ Summer Sale ” of reductions 
of up to 60 per cent in 30 of their 
European hotels with rates 
guaranteed in US dollars. 
Georgette Lordi of Inter-Con- 
tinental recognises that the 
guaranteed rates “ is a risk, but 
we are taking it because we are 
committed to encourage travel 
and be part of the trend to lure 

Americans back to Europe.” 
Already, 5.000 room nights have 
been booked for the sale, which 
is available in the months of 
July and August only. 

Amid the bargains, Amer- 
icans are having to be far more 

cautious in selecting among the 
available options. When air- 
lines introduced sharply 
reduced feres this spring, they 
contained a new, no-c a media- 
tion proviso so that missing the 
flight meant losing the ticket 
altogether. Similarly, car hire 
has become a far more compli- 
cated exercise especially with 
regard to collision damage 

Tbe automatic coverage for 
hired can used to force the 
customer to pay the first $500: 
now the companies have 
boosted the deductible to 
$3,000. which forces more 
people to pay as much as an 
extra $9 a day for total coverage. 

At the same time, insurance 
on one’s own car may cover an 
accident in a hired car and 
some credit cards also cover the 
deductible on car-hire insur- 
ance. Such complexities may 
not have been worth sorting out 
for $500, but suddenly need to 
be known about for a $3,000 

As Europeans face increasing 
liberalisation of their airlines, 
they too will fece confusion and 
a multitude of choices for each 
travel decision they make. 
Despite the dilemmas forced on 
travellers, they at least have the 
chance to make a decision more 
tailored to their needs, as air- 
lines, hotels and car hire com- 
panies pick niches to serve 
smaller numbers of travellers 

Frank Up&lus 

Puerto Rico looking like a Caribbean Miami: an attraction for those 
taking advantage of an increasing opportunity to combine a 
business and a pleasure trip. 

Trends in Business Trips 


s , ■ j ■ , 

5 : ‘ ‘ f:.v 

l ; t- 



Average nights per trip 
Average miles per trip 
Used an airline 
Trip Included vacation. . 
Travelled over a weekend 
Source: US YomH Dole Centers Ni 

1,000 1,030 1,000 1,180 
35% 48% 43% 44% 

I Tmwi Stray 

Profile: Cathay Pacific 

Favourite of 
the cognoscenti 

BRITISH AIRWAYS may prefer Eventually Swire gained a 70 
to be known as the world’s per cent stake in Cathay, with 
fevouxlte airline, but there is the -remaining 30 per cent held 
little doubt that Cathay Pqcifip by the Hongkong and Shanghai 
ranks as one of the world’s most Bank. ■■ ••• ’• " 

successful airlines— it has made . ' - ' Jn April loast year, however, 
a profit for most of its 40 years o| sorop .‘15 percent . oT Cathay’s 
operation. V- - • ?. .shares’ were offertdfor sale to 

Cathay, moreover, has become the public on the Hong Kong 
ar particular favourite with bo si- exchange — with the flotation 
ness travellers to Hong Kong oversubscribed by a record 1 56 
and tbe Pacific Rim countries, times. - ‘ 

Not only did Cathay pioneer-. .Earlier this year -the. Beijing- 
non-stop fights from London to based China IntemationalTrust 
Hong Kong in 1883 — subse- and Investment Corporation 
quently copied by both BA arid (Citic) took n 12.5 per cent stake 
British Caledonian— bat It was in Cathay : Pacific— a move 
also the first airline to operate a widely seen as strengthening 
specialist in-flight audio prog- Cathay's position in advance of 
ramme aimed at business the return of . Hong Kong to 

travellers. China in 1997. . 

Mr Steve Harvey, chief execu- But it is unlikely that the 
tive of In-Flight Radio who pri- Chinese authorities will make a 
duce the business programme, bid for the whole airline' One of 
says that it is listened to by a Cathay’s strengths is the fact 
quarter of the passengers on a that-it has not been fettered by 
typical flight “Both British being a government-owned 
Caledonian and British Airways national airline 
now have simflar programmes ” Mr Rowland Cobbold, 

he B dds. -Cathay’s marketing director, is 

The business class on in a unique position to confirm 
Cathay— called Marco Polo— this. He spent some 14 years 
has alone won a number of with BAuntil joining Cathay in 
-travel trade awards for its level 1880. “The management and 
of service. staff at Cathay are all very com- 

Even for the non-bos inss mitted to the success of the air- 
traveller Cathay is ranked line because we have to com- 
higWy. Subscribers to Holiday pete to survive,” he maintains. 
Which? magazine earlier this Mr Cobbold and his col- 
year voted Cathay as its leagues have long realised that 
favourite airline after the War- the business traveller is a vital 
date charter carrier. psrt of the airline s success. As 

Cathay was formed in IM6 by the gateway to China and the 
two former wartime pilots— an Pacific Rim countries Ohai- 
Australian, Mr Sydney de Kant- land, Malaysia and the Phihp- 
zow, and an A merican, Mr Roy pines), Hong Kong was dearly 

^Sfpfo^r^hSS 1 airitoe ^Slsingly important for bud* 

SS^oITo^HoS 5 VSStatoS “etthay was one of the first 
maior internatinal carrier. It airlines to introduce th e Super ■ 
SSmSS 500 flights 74MM. - aircraft wfth an 
I! week to 37 cities in 26 conn- extended upper deck This deck 
titoTraneing from London and is used for economy class 
Tokvo through to Rome, Paris, passengers, enabling the busi- 
can ptan- ness class to be extended to take 
frivn^u^'desttaatiOBS- intro- 86 seats instead of the more nor- 

l?pre,ent, th« 300 aircraft 
major holding with the extended business 
mnanv "in 1948, and class cannot be used on the non- . 

SvtoS 5 i$££5w atop 

ever since, spring Cathay will be able to 
beenofreratiog achieve this when ittak^deliv- 
8r?H ■ XeTSr East for ery of its first Boeing 747-400, 
^V<^tJvitseS>eri- which will allow flights of 16 
See has helpedTCathay sub- hours with a frill- payload. 

stantiaUy to its development n*«M rhniriiffl 

over the past few decades. DawW CfturcllHI 


When nothingbut the best 
will do phoneGarole Green 
on 0733 502598. 

Thomas or 

Cook itadaw.Wawtf 

Quite simply the b«K Business Travel Service in the world. 




. i** 




v . 








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Financial Times Thursday May 81 1987 


| Bank gold card services J| 




gross annual 
. Income 


overdraft Overdraft 

limit Interest 

Joining Annual 
too subscription 



Adam & Company 
QoM Card 



£10.000 2Vs% over 
base rate 

None None 

No charge 

Bank of Ireland 
GoM Card 




£10,000 2%% over 

base rate 

£20* £50 

£25 p.a. 

Bank of Scotland 
Premier Card 



£10,000 2%% over 
base rate 

£10 £35 

£10 p.a. 

Barclays Premier 



£7,500 2%% over 
base rate 

£10 £40 

(£35 if paying 
by direct debit! 

£10 p.a. 


Coutts QoM 



£10.000 2 %% over 
base rate 

None £60 



Qftndlays Gold 





£10.000 2 V 2 % over 
base rate 

£20* £50 

£50 p.a. 

Lloyds Bank 

Gold Card 




£10,000 2Vi% over 
base rate 

£20* £50 

£50 p.a. 

Midland Gold 



£10.000 2%'ftover 
base rate 

£10 £40 



NatWest GoM 

Plus Service 



£10,000 2%% over 
base rate 

None £50 No 

(£40 if paying charge 
by direct 
debit) Waived 
in first year 

Robert Fleming/ 
Save & Prosper 
Premier High 
Internet Bank 



Up to £10.00 4% over 
after one year LIBA gross 
qualifying period compounded 
annual rate 

None None 



Royal Bank of 
Scotland Gold Card 




£10,000 2%% over 
base rate 

£20* £50 

£25 p.a. 

* Waived for existing American Express cardholders. 

Source; Save & Prosper Guk» 

Paying the bill 

Business centres 

Plastic cants are 
doing nicely 

EVEN THE most experienced 
business executive would not be 
foolhardy enough to pontificate 
on the best way to take money 
abroad. His advice would be to 
join the belt and braces brigade 
and always have alternatives. 

The range of instruments in. 
the way of credit cards and 
travellers cheques is ever wide- 
ning and to attract the in-house 
travel and entertainment 
department of a company or the 
executive, who leaves it to his 
secretary to make his or her 
travel arrangements, special 
inducements to use a particular 
credit card or traveller’s che- 
que are constantly being intro- 

It doesn’t need much 
sophistication to know what 
currency is needed for Spain or 
France but travelling to Swazi- 
land, the Seychelles or Surinam 
needs a little more thought So 
Thomas Cook Financial Ser- 
vices. the providers of the 
world's largest range of 
travellers cheques, entices with 
a world-wide currency guide. 

It provides easy at-a-glance 
references for even the most far 
away places, listing in order of 
preference, the recommended 
travellers cheque currency for 

each country. • 

Bat just bow do UK com- 
panies provide the travel and 
entertainment expenses for the 
nearly £20bn now being spent? 
A report by American Express 
recently completed and soon to 
be published has looked at the 
methods of payments among 
Britain's top 100 companies and 
finds that cards come out on top 
for the travelling executive. 

Some 70 per cent of com- 
panies issue cards of which 73 
per cent are American Express 
and 81 per cent issue travellers 
cheques and 78 per cent some 
form of cash advance. But 
travellers cheques and cash' 
advances are seen as being used 
to supplement cards rather than 
to replace them. 

Considerable funds are avail- 
able through the use of bank* 
gold card services, the vast 
majority of them offer a stan- 
dard overdraft limit of £10,000. 
Gold cards offered by American 
Express, Visa. and Mastercard 
provide a range of other 
benefits such as free travel acci- 
dent insurance and an easy way 
to replace lost cards. 

For travellers in Europe the 
system of ear ©cheque is widely - 
in use but no figures are avail- 

able to show how much use is 
made of It for business travel 
specifically. Its availability in. 
15,000 banks with some 210.000 
branches means nearly every 
bank branch in 40 countries in 
Europe and the Mediterranean, 
does, however, offer a cash adv- 
ance service to nearly 40m 
European bank customers. ' 

Its services, too, are con- 
stantly being extended. The 
most recent countries to open 
up their retail sector to 
enrocheqne customers were 
-Hangary and Tunisia and were 
followed on March l by Greece. 

The maximum guaranteed 
amounts are not as large as the 
gold card facility and for the 
average user is linked, to the', 
equivalent of SFr 300, the Swiss 
franc being used because of its 

For the businessman flying 
around Europe a great deal of 
effort is being made to woo him 
with credit cards. British Air- 
ways estimates that credit cards 
ticket sales currently represent 
about 25 per cent of BA’s 
worldwide ticket sales and that 
figure does not fiu etna te greatly 
from country to country. But in 
the US it can run as high as 50 
per cent 

TIM WMtfs 30 

linen irt p*taaa fOrtN bmtaaes MiMler 

coat £ 


COSt £ 











Kingston. Jamaica 









New York 



Khartoum. Sudan 






Port Moreaby. Papua NG 


















Muscat. Oman 






Oousia. Cameroon 








That is why the airline and 12 
other European airlines have 
launched the AirPlu* card, 
designed solely for corporate 
use by limiting its use'soiely to 
areas of business expenditure. 
It can be used for restaurant 
bills, rail tickets, hotel bookings 
and will even provide cash adv- 
ances but it won't be accepted 
outside the business environ- 

ment which may be a little hard 
to define when » cornea to busi- 
ness entertaining. And if it hap- 
pens to be in Tokyo, the world * 
dearest place to visit on busi- 
ness— the daily coat is about 
£ 200 — the executive had better 
be metaphorically wearing his 
belt and braces. 

Arthur Dawson 

Our reputation for punctuality is the envy 
of every airline flying to Amsterdam. 

With something approaching monotonous 
regularity, KLM flights leave on time and arrive 

on time. All day, every day. Don’t you think it’s 
about time you started flying KLM? 

The Reliable Airline 

Royal Dutch Airlines 



mam banquet In tl»a watawaiiHo Hong Kong's Mandarin Hotel. 

Profile: Mandarin Hotel 

Top places for 
top people 

Hong -Kong and the Oriental in 
Bangkok are two of the world's 
famous and most exclusive 
hotels — attracting the top eche- 
lons among the international 
business traveller fraternity. 

Yet this 1 month sees a- radical 
new development which could 
affect the fortunes of both these 
top hotehs. J the first Mandarin 
hotel in the US is being opened 
on the top floors of San Francis- 
co’s third tallest building. 

The move, if successful, could 
spearhead fUther openings! in 
the US and Europe of both 
Oriental and Mandarine clones, 
aimed at attracting the top busi- 
ness traveller. 

“ In five years time the Man- 
darin Oriental group will oper- 
ate a portfolio of between 15 
and 20 grand luxe hotels in key 
gateway cities worldwide” 
maintains Mr Peter Tyrie, the 
40-year old managing director of 
the group. 

" We are currently looking at 
such cities as Seoul, Taipei, 
Tokyo and Sydney in South East 
Asia; New York, Washington, 
Chicago, Los Angeles and 
Toronto in North America; and 
London, Paris, and Frankfort in 
Europe,” he says. 

Apart from the new San Fran- 
cisco Mandarin, the company 
has already opened a new 
Oriental hotel in Singapore ear- 
lier this year. “ I would like to 
see the opening of two hotels a 
year for the next five years, 
mainly through acquisition and 
refurbishment of existing 
hotels," adds Mr Tyrie. 

- Such moves might seem like 
heresy to the business 
travellers (who account for at 
least 60 per cent of the two origi- 
nal hotels occupancy rates) who 
are unstinting admirers of the 
high level of service at the Man- 
darin and Oriental hotels. Might 
such expansion, they ask, poss- 
ibly devalue the world-famous 

Mr Tyrie, not surprisingly, is 
convinced that it is possible to 
recreate the Mandarin and 
Oriental atmosphere through- 
out the world. 

Since joining the Mandarin 
and Oriental group last June, he 
has brought in new computer 
systems, reduced central man- 
agement levels, and brought in a 
te&n of newcomers to help him 
revamp the entire operation. 

His new broom has mainly, 
been behind the scenes — to the 
relief of his hotels' admirers — 
although he has introduced 
such changes at the Hong Kong 

Mandarin as insisting that the 
staff have name badges instead 
of anonymous raumbers- 

But Mr lYrie’s immediate 
objective is getting the group 
ready for its demerger from the 
Hong Kong Land company, its 
immediate parent company, and 
its subsequent public flotation. 

“The Hong Kong stock market 
cannot but rafrem4taom the in- 
troduction of a new blue-chip 
stock with a household name,, 
while the hotel company's 
performance should be en- 
hanced by more direct manage- 
ment accountability to share- 
holders," explains Mr Simon 
Keswick, chairman of Jardine 
Matheson (the ultimate parent 

Although the Oriental in 
Bangkok has been the haven of 
wealthy travellers for over a 
century, it has only been man- 
aged by the Mandarin Oriental 
group since 1975. 

It was in 1963, however, that 
the Ma n darin was opened in a 
rather unprepossessing buil- 
ding on Hong Kong island. It has 
some 545 rooms and suites and 
three top-class restaurants. 

At present, the hotel is going 
through a two-year renovation 
programme costing more than 
HKfiOOm. This summer the 
hotel's front facade and lobby 
are also to be remodelled at a 
cost of HK$5m. 

“In today’s competitive mar- 
ket not only must the service be 
of the highest standard, but so 
must the rooms," explains Mr 

The Mandarin does not' like 
taking on large groups of busi- 
ness travellers— for which it 
does not have the facilities — but 
prefers to be the luxury home 
for the senior executive travell- 
ing independently. “Although 
we are very interested in 
developing our incentive travel 
business for individuals.” 
admits Mr Tyrie 

Although the group is looking 
hard for a suitable site or 
acquisition in London— the for- 
mer offices of - the Greater Lon- 
don Council has been men- 
tioned as a possibility— it may 
be towards China that Mr Tyrie 
also turns his attention. 

With the return of Hong Kong 
to China in ten years’ time, Mr 
Tyrie and his colleagues are 
considering developing a chain 
of hotels— probably under the 
Excelsior brand name — in 
major Chinese cities. Perhaps 
the Mandarin, Beijing, may not' 
be top far. off after alL 

David Churchill 

The best 


When nothing but the best 
will do phone Carole Green 
on 0733 502598. 




Quite amply the best Business Travel Service in the work! 


Thursday. May 21 1987 


■■ ■ -l A 

v -v 

'6S fe 

»* 1 

Five extraordinary years 

have seen the growth of 
ri rrei — funds 1 assets far exceed 
£ Iftr rfl the growth of liabilities, ^ 
clE*l B writes Investment Editor “ 
Barry Riley, Yet there is unease among 
managers who, as long as they fail to 
match the indices, are vulnerable to , 

competition from index-matching pro- 
ducts and independent firms. - 

The hazards 
of overfunding 

PENSJON FUND management 
for UK company schemes is now - 
a £ 200 bn business, and one that 
has been enjoying an unpre- 
cedented run of success. 

Over the past five extraordin- 
ary yeans the annualised rate of 
return on the aggregate funds 
monitored by the biggest 
performance measurement ser- 
vice— that operated by the WM 
Company— was 21.7 per cent 
(including property, which drag- 
ged down the overall growth 
from the 24J2 per cent that was 
achieved in other market). 

The second largest service, 
the combined actuarial opera- 
tion (Caps), reports a median 
return of 22.8 per cent for the 
same period. 

What matte rs is not the abso- 
lute figure, but how it compares 
with the growth of the liabilities 
of the funds, which in almost all 
cases pay benefits linked to 
final salaries. 

Over the Shme five-year 
period the growth of average 
earnings has been running at 7.7 
per cent a year,, leaving a huge 
margin by which the growth of 
assets has been .exceeding the 
growth of liabilities. • 

However, these. excellent 
returns are not necessarily a- 
source of satisfaction to mana- 
gers. The buoyancy q£ invest', - 
meat mark et s has made the 

funding of pensions liabilities a 
very wise policy. Bat although 
fund managers may try to bask 
in the reflected glory of the pro- 
longed bull market, , they are 
more suitably judged by their 
performance against the 
relevant market indices, not by 
absolute returns. • 

According to . Caps, . the 
median UK equity fond under- 
performed the FT-Actuaries 
All-Share Index, the best mea- 
sure of the broad UK equity 
market, by a fall percentage 
point last year (though up to half 
a point of the shortfall can be 
explained by technicalities, 
relating to the way that major 
new issues, like TSB and British 
Gas, were introduced into the 

UK pension funds have been boosted by an Increasing willingness to Invest In overseas equity markets 

Pension Fund 

. So long as majority of invest- 
ment managers find it hard to 
match, let alone beat, the indi- 
ces, they are vulnerable to the 
competition of index-matching 
products, which seek to achieve 
limited bnt carefully defined 
objectves at relatively low fees, 
.objectives atrelativety low fees. 

; Meanwhile, a growing group 
of independent fixnd manage- 
ment firms has sprung up to 
challenge the domination of the 
- established merchant bank- 
based manag ers, who have been . 
in the -ascendency over the' past 
10 .or IS years. 

The independents— which 
range' from long-established 
investment trust management 
companies to newly created or 
spun-ofT Investment bouti- 
ques— now manage about 9 per 
cent of the assets of UK pension 
schemes, though their portfolios 
tend to be comparatively mnaii. 

While the volume of invest- 
ments of pension funds con- 
tinues to rise, room is created 
for the increasing number- of 
external managers. 

This is still more true when 
some of the big internally-man- 
'aged fonds are finding it diffi- 
cult to sustain the -quality of 
their in-house , management 
teams and are hiring -outside 
managem.^ -British*. Ran ' and 
Unilever - both . externalised > 

their investment management 
last year. - 

But on an underlying basis the 
market is 'scarcely growing. 
Many schemes are overfunded, 
and have cut back their con- 
tributions. If there were a bad 
year for the investment markets 
there would be nothing to pre- 
vent a foil in overall values, and 
fond managers’ fees— which are 
calculated on the basis of a per- 
centage of portfolio values— 
would decline. 

Already, many managers have 
been trying to. persuade their 
pension fond clients to accept 
higher fees, to reflect the 
structural changes in the stock 
market in the past year. The 
merchant banks/ in particular, 
have been trying to replace the 

income from commission-split- 
ting which, after Big Bang, is no 
. longer practicable. 

Increasingly, the true costs of 
pension fond management are 
coming out into the open. This 
means that pension scheme 
trustees will be alerted 
increasingly to the possibility 
-that different services can be 
“ unbundled.” They may want to 
encourage the growth of 
.specialist providers of services, 
of the kind that are already com- 

- mon in the US. 

- But while the pension fonds 
grapple with the implications of 
the City’s Big Bang, the focns of 
change has already moved on 

- Government legislation- 2s 
triggering upheavals, for pen- 

sion fonds in two other respects. 
* For one thing the Financial 
. Services Act is ushering in a 
new era of regulation of the 
investment industry. That is 
requiring a highly detailed 

For another, the encourage- 
ment of. . personal pensions 
raises a question mark over the 
durability of the conventional 
corporate pension schemes. 
External fond managers need to 
have diversification plans 

Nearly all corporate schemes 
'are now based upon final sal- 
ary-linked benefits, with 
implications for the type of 
investments that are appropri- 
ate to. match snch liabilities. 
.This has drawn managers to 

Competition for clients : 

Profiles : HIM Samuel Pensions 
Investment Management: Mercury 
Warburg Investment Manage- 
ment 2 

Management styles 
in-house teams, and leaving It 

to the professionals 3 

international strategies 
Asset allocation 4 

Big Bang: If s brought new patterns 
to remuneration and to deal ing 5 

Institutional responsibilities 
Fund-splitting 6 

equities, and to other equity- 
type assets, notably property. 

Short-term fluctuations in the 
value of such assets are less 
important than their proven 
ability to match inflation over 
the very long term, whereas to 
fond through fixed income 
bonds would be to introduce a 
fundamental mismatch into the 
asset/liability structure. 

Even with final-salary 
~chemes, however, there may 
well be substantial numbers of 
deferred pensioners within the 
scheme, whose benefits are not 
folly protected against infla- 
tion; and it may make sense to 
fond these liabilities in a diffe- 
rent way. 

The possibility now is that 
many * employers will offer 
alternative money-purchase 
schemes, where the benefits 
would be linked to the returns 
actually achieved — in the same 
way as for fully portable perso- 
nal pensions. 

Such money purchase 
schemes need to address the 
problem of high volatility, 
which a corporate final salary 
scheme can cope with, but 
which could be dangerous for 
an individual unlucky enough to 
find the equity market at a low 
ebb on his retirement day. Some 
method of iimitingthe downside 
risk needs to be adopted. 

Fund managers are now 
assessing the implications of 
splitting existing pension port- 
folios into final salary and 
money purchase fonds, and how 
this might affect the risk profile 
to be adopted. At this stage, they 
do not envisage serious prob- 

What is more threatening to 
their own commercial future, 
however, is the possibility that 
large numbers of occupational 
scheme members might opt for 
personal pensions— especially 
the younger employees whose 
contributions are so important 
in swelling the volume of fonds. 

Mass defections do not seem 
likely at this stage, but fond 
managers will want to consider 
ways of maintaining their 
volume of foods under manage- 
ment should personal pensions 
for employees achieve a signifi- 
cant impact. 

Some managers already have 
unit trust and life assurance 
arms, which sell into the self- 
employed personal pensions 
market; bnt even a group as 
. large as Mercury Asset Manage- 

FJow of funds 

Regulation 7 


Personal pensions 8 

Index funds 9 


Performance measurement 10 

New techniques 11 


Pooled funds 12 

ment does not market personal- 
pension products at this stage. 
Such groups can be expected to 
reposition themselves for the 
new market opportunity. 

As for the Financial Services 
Act. the Investment Manage- 
ment Regulator)' Organisation 
(Imro) is currently gearing itself 
up to commence operations, and 
the pensions industry will rep- 
resent a large part of its super- 
visor)’ territory. 

Specifically, the new rules are 
likely to force a more careful 
division of responsibilities 
between trustees and invest- 
ment managers, especially in 
small fonds. where the lines o( 
authority have often been ill- 

Regulation of pension fond 
management has been almost 
non-existent in the past; and, 
while the sector has a strong 
enough professional infrastruc- 
ture to prevent serious abuses, a 
good deal of slackness is 

Disclosure of the true level of 
income enjoyed by external 
fund managers from running 
pension scheme portfolios 
remains poor. 

Imro's rules appear to be 
quite tough, with insistence on 
full discloure of all charging 
arrangements, and a ban on con- 
troversial practices such as the 
“late booking" of bargains. But 
it has yet to be seen how these 
rules will be interpreted in 

One area to which the new 
regulators might turn their 
attention is performance 
measurement, the objectivity of 
which can all too often be called 
into question. 

This is because good perform- 
ance figures have become vital 
marketing pre-requisites for 
investment managers who hope 
to win contracts at competitive 
“ beauty contests." 

But whether by being selec- 
tive about which fonds are 
included, or by picking periods 
of measurement carefully in 
order to give the most favour- 
able impression, nearly all man- 
agers appear to be able to claim 
to be above average. 

This is a comparatively minor 
distortion, and one that can 
easily be seen through by most, 
advisers and trustees, but it is 
symptomatic of the kind of sub- 
tle device that the new regula- 
tors ' will be required to 



Numerically it’s no problem. 

With no fewer than fifty- 
five fund managers and analysts 
responsible for overseas mar- 
kets, as well as their adminis- 
trative and supporting staffs, 
this aircraft would have 
standing room only 

The problem is one of 
geography: it would take at 
least a week's flying time 
to collect them all. 

From London, Zurich, 
Tokyo and New 'fork. 

From Hong Kong, 
Melbourne and Sydney ■ 
Even from Manila, Taipei, 
Seoul and Kuala Lumpur 
In short, we know that 
you need good people oh the 
ground to get your overseas 
portfolio off the ground. 

Which is wty our special- 
ists here in London are able 
to manage your assets in any 
market, drawing upon the . 
information they receive from 
Flemings' network of experts 
around the world.. 

For example, a US port- 
folio assigned to our North - • . 
American Group wilt benefit 
from our extensive knowledge 
of the US market (After all, 
we. have been investing in the 
USA for over a hundred years.) 


And in the Far East. • in- London, but investing in on the ground in Tokyo, Hong 

Flemings is the largest foreign markets worldwide. Kong, Zurich or New York, 

investor in the Japanese Perhaps you are looking our specialists will be happy 

market with offices through- for an international bond and to take off to come and 

out the Pacificbasin. currency manager in which talktoyou, 

Those ofyou with a broad case our Multi-Currency As you ponder these 

international perspective, Fixed Interest team can complexities, consider one 

who are baffled by the develop a portfolio which further point. Our skills in 

choices available, can seek the meets your needs. managingdistant investments 

advice of our International Alternatively if>ou prefer are matched only by our 

Pbrtfolios Group, based your assets to be managed determination to maintain 

on the ground In Tokyo, Hong close and frequent contact 
Kong. Zurich or New York, with our clients. 

5 and frequent contact Robert Fleming Investment 
i ourdients. Management Limited, 

So investments which are 25 Copthall Avenue, 
out of this country won't be London EC2R 7DR, 
investments beyond your telephone (01) 638 5858. 
control. He's notone forexagger- 

For further information, ated sales talk. But all the same, 
contact Nicholas Holliday at he'll promise you the earth. 




Financial Times Thursday May 21 1987 








Leading Pension Fund Managers 

Selection procedures 
let in the independents 

IN TWENTY years the manage- 
ment of company pension hinds 
has changed from being one of 
the City of London's cosiest 
businesses to one of its most 

One leading manager, bidding 
for a recent contract, found that 
he was one of 70 applicants, of 
which 60 claimed to be Gist 
(tortile performers — that is, 
trey had achieved results in the 
top 25 per cent of all foods 
assessed by leading perform- 
ance measurement services. 

The biggest foods are now 
aggressive enongh to ask 
prospective management firms 
to compete on price, and to 
come clean on all the little extra 
sources of revenue that have 
bolstered fond management 
profits in the past 
This is a sign of the growing 
maturity of the pensions indus- 
try. In its early days manage- 
ment tended to be dominated by 
the insurance companies, with a 
pooled-fond approach and high 

In the 19708, however, the 
merchant banks came to domin- 
ate the field, aided by strong 
corporate connections and a 
willingness to provide a com- 
prehensive service which could, 
however, be tailored to the 
requirements of individual 
clients. Competitive bidding 
was rare. 

In the 1980s, a number of 
other contenders have entered 
the fray, seeking a share of a 
market which has been expan- 
ding rapidly and has proved 
unexpectedly profitable for the 
merchant banks. 

Several independents, such as 
Henderson Administration, 
Fidelity, mtm and Murray John- 
stone, all originally investment 
trust and/or unit trust managers, 
have been winning a lot of busi- 

In one respect, competition 
has diminished a little The 
stockbrokers have disappeared 
as a separate force, apart from 
Cazenove which — for the first 
time— is disclosing the scale of 
its UK pension fond business 
the management of £L67bn for a 
total of just over 60 clients. 

Phillips & Drew remains a 
powerful competitor, but is now 
run entirely separately from the 
stockbroking business. Other- 
wise, the leading brokers active 
in pension fond management, 
such as Grieveson Grant and De 
Zoete & Bevan, have been 
absorbed into the fond manage- 
ment departments of their new 
banking parents. 

The fresh source of competi- 
tion, however, is a group of hide- 
pendents, some of which are 
new to the pension fond field. 
These include further invest- 
ment trust management com- 
panies, one or two of which are 
spun-off in-house pension fond 
managers now looking for exter- 
nal business. 

Curiously, the Prudential is 
the only insurance company to 
make any kind of showing in the 
segregated management busi- 
ness. It scored notable succes- 
ses in the British Rail and 
Unilever * beauty contests ” 
last year. 

Otherwise, Insurance com- 
panies appear to have stuck to 
their traditional type of busi- 
ness, or perhaps have simply 
been unable to deliver the kind 
of performance required. 

The rise of the independents 
reflects the development of a 
selection system that allows 
them to compete. Whereas, 20 
years ago, merchant hank* or 
stockbrokers were chosen 
behind closed doors because 
they had corporate connections, 
today the procedure is entirely 

According to Mr David Dun- 
can, of Schroders, more than 90 
per cent of references now come 
from intermediaries, either con- 
sulting actuaries or benefit con- 
sultants. In the course of a year, 
leading management houses 
such as Schroders have to fill in 
up to 100 different question- 
naires, sometimes r unnin g to 16 
pages and 70 separate informa- 
tion requests. This is not a chore 
which can be delegated to 
juniors, because the answers 
may need to be subtly modified 
to suit particular requirements. 

The fond managers are not 
always happy with the demands. 
“ There is an undue amount of 
attention being paid to the role 
of individuals,” complains Mr 

For less well-connected firms, 
however, there is an opportun- 
ity to break into the market by 
establishing credibility with the 
consultants, and thereby getting 
on to short lists for selection. 

Bat this is no easy path. Mr 
Joe Scott Plummer, or Martin 
Currie, grimly toured the circuit 
for years before breaking 
through. “People were 
interested, and be ginning to lis- 
ten to the story, but we were 
always coming second,” he says. 
“Then suddenly it began to 
come right” 

Martin Currie actually found 
It easier to break into the US 
Erisa (Employment Retirement 
Income Security Act) market for 
international fonds, helped fay 
the feet that US pension fond 
trustees are more accustomed 
to appointing boutique-type 

Behind Martin Currie many 
others are following. For instr 
ance, John Govett, best known 
as an investment trust house, 
has brought in Mr Robin Berrill 
as sales director to promote the 
pension fonds side Now recog- 
nised on a more dearly defined 
basis. It at present runs some 

After bringing in the WM Com- 
pany to authenticate some 
impressive performance 
figures, he has toured 60 offices 
of some 30 different consultants 
as part of the process of what he 
describes as “selling the Govett 
name and the Govett product.' 

The most assiduous cultiva- 
tion of consultants, however. 

can get the applicant no forther 
rt list of fonr or five. 

than the short 
There will still be the need to 
convince the trustees, who 
increasingly these days are 
primed with questions based 
upon bitter experience. 

So fund managers are finding 
an increasing proportion of 

Profile/Mercury Warburg IM 

‘Benefits of being 
large have risen’ 

DESPITE THE rise of the inde- 
pendent pension fond maim. 
gers, Warburg remains kin g In 
the past year Mercury Warburg 
Investment Management has 
consolidated its position at the 
head of the pension fluid man- 
agement league table, bolstered 
by around £500m of fonds pro* 
viously managed separately by 
stockbrokers Rowe Is Pitman, 
now also part of the Mercury 
International group. 

A highly professional service 
and some impeccable invest- 
ment performance figures lie 
behind MWIM's success. During 
the past five calendar years its 
returns have beaten the WM 
Company's average by between 
2 and 4 per cent each year. 

In 1986, for example, the total 
return on UK pension fond 
assets under management was 
26.5 per cent, against 22.9 per 
cent for the Industry average. 

“ There is no magic formula,” 
says Da vid Price, joint chair- 
man of MWIM and deputy chair- 
man of Mercury Asset Manage- 
ment “ You have to add value at 
each level of decision making.” 
But overall asset allocation 
decisions, he suggests, have 
always be en a very important 
factor in MWIM’s success. 

In the past year, for instance, 
the decision to stick with the 
Japanese equity market bas 
paid off for clients, at a time 
when most British managers 
have pulled out 

The Big Bang changes in the 
London markets might have 
been expected to work against 
the big merchant banking 
groups, which had profited from 
the old commissions structure, 
but David Price says he is sur- 
prised that so few independents 
have taken foil advantage of the 
new situation. 

In other ways, he suggests, 

the benefits of being large 
have actually increased In the 
past few years. You need exper- 
tise in all world markets if you 

are to provide a balanced ser- 
vice.” Mercury is big enough to 
run its own investment office in 
Tokyo, for example. 

And somewhat unexpectedly, 
Big Bang bas helped the big 

managers by increasing the 
liquidity of the London equity 

market, in particular by allow- 
ing whole portfolios of £50m or 
more to be sold quickly as “ bas- 
ket trades.” 

Nevertheless MWIM recog- 
nises that the structure of the 
pensions management market 
in the UK Is moving towards 

greater specialisation. Besides 
' c balanced service, it is 

its basic 
now offering specialised man- 
agement of equities for Japan, 
Continental Europe and the UK. 

“We have quite a lot of clients 
for these services, but fewer 
than we might have expected,” 
says Mr Price 

The big event for MWIM 
recently has been its separate 
flotation as the major compo- 
nent of Mercury Asset Manage- 
ment, of which 25 per cent has 
now been sold to the public by 
Mprcuiy International 

The City revolution has re- 
emphasised the need to demon- 
strate the independence of 
fond management operations of 
merchant banking groups. 

Strict Chinese walls have, in 
any case, surrounded the fond 
management side, and it is phy- 
sically a mile away from the 
Mercury group's broking 
market making operations 
(though it remains In the same 
building as the merchant bank 
S. G. Warburg). 

David Price says that MWIM 
has been concerned to reassure 
potential clients about inde- 
pendence But he insists: “ The 
evidence is there tbat we vote 
our shares in our clients* 
interests even when that 
clashes with S. G. Warburg.” 

Barry R8ey 

their one-hour time-slot 
devoted to questions, with 
perhaps only 20 minutes 
allowed for their prepared pre- 

Despite the greater know- 
ledge displayed by trustees 
these days, such beauty parades 
are inevitably hit-or-miss 
affairs. First i m p r essions may 
relate more to appearances 
than ability to make complex 
investment judgments. 

Yet it is dangerous to rely too 

rrmi-fi qjj marfatU ng man 

Trustees can react negatively to 
the hard sell approach, and they 
win certainly want to meet the 
manager who will actually be in 
charge of the fond. They will 
also want assurances about con- 

One of the main selling points 
for many of the smaller inde- 
pendent management firms is 
precisely that they can offer an 
individual relationship. The big 
merchant banks can provide 
comprehensive expertise and 
worldwide n et wor ks , but it can 
be hard for them to keep sen- 
ding a familiar face every 

value of funds 

Number of clients 




i 1986 







Mercury Warburg Investment Mngt* 







Robert Fleming Invest. Mngt: 







Barclays de Zoete WMd Invest. Mngt.* 







Schroder Invest. Mngt. 







Phillips & Drew Fund Mngt 







County Invest. Mngtf 







Morgan Grenfell Invest. Mngtl 







Prudential Portfolio Mngrs. 







Baring Invest. Mngt. 







Lloyds Invest Mgrs. 







Henderson Pension Funds Mngt 







KMnwort Grieveson Invest Mngt** 







N. M. Rothschild Asset Mngt 


- 2.479 





Midland Montagu Fund 














H?n Samuel Pens, bluest Mngt 




a es 



Fidelity Inti. Invest Advisors (UK) 







Hambros Bank 







Murray Johnstone Pension Mngt 














Lazards Investors 







Charterhouse Invest. Mngt If 







Legal & General Invest Mngt 



-13-2 „ 




Touche Remnant Pension Fund Mngt 


1,005 .5 





Geoffrey Mortey & Partners 







♦tortalwdteflMtH M i nwi tfftwJ Santo pWWfl pw d- t taiwtts cttM pibied In 1988. bnt atWM am wan m 

1BB7. »B»ew»>ai MWMmM«fw s nnwwni wB « d^d»ZoggweBpw^PBMlc»iftedPip»nmM«lHOttBbarMB8. « In wanton. MMwd finds 

I K tfM bagbming nl 

■nountos to £1407ta to 1S0B (£2£0Oa to 1888). tactodB* Spim for RaUtofc Naum&nltb IncerpocMMt Into County In June 1S86. f kwJutos 
19BG fleires tor PomOar & Boy*. ItacbOas Pnxtoatta) Sc«n Pwtaton Rind. - KMnmta Swann telwwtpn Onwt mama ttanng isos. 

tt kwbOtflanallnamMitwm of MMandAnk and SaruM Montagu & Co n«r0td In 1988. dtaadradin 1968 to BrtuMaAmw Houma pta. ond 
maqtMl to UK Imoamant operation. Brttmnto managrt 13 peorion flaw* cilam wife aoato of £70m. and ttoaa am taemmtod to MM* ngurarts 

at OMMte-31 1988. ff entfuda* eta*# now managed In awrimled wMofea post-Bnc Bant Ream (or 1985 and 196B am not ommUB. 
tf Pm of Royal Bank of Scotand Grew. Undarahea an Da tow et awnt raa mg ament acttaOeo. 

Bany Riley 

: Jan Scfrtfnf 

Profile/Hill Samuel PIM 

Specialist services point the way 

CAN MARK Henderson reverse 
the slide at Hill Samuel Pen- 
sions Investment Management ?< 

Last year Mr Henderson rose 
to the managing director’s spot 
as a result of upheavals in the 
group's pensions investment 
subsidiary, following serious 
client losses because of poor 
investment performance in 
1964, 1985 and early 1986. 

The most damaging individual 
setback was the loss of £L2bn of 
the British Rail pension 
scheme's money, but many other 
clients also pulled out as Hill 
Samuel felt the foil blast of the 
intensified competition in the 
pension fond management 

“ We recognise that the prob- 
lem lay in below-average UK 
equity stock selection,” says Mr 
Henderson. Curiously, the inter- 
national equity performance 
was good — in the top decile. 
And Hill Samuel’s unit trust 

management team, led by 
Howard Maguire, had not suf- 
fered the same problem. 

Apart from appointing Mark 
Henderson from within. Hill 
Samuel also brought in David 
Barter, from Norwich Union, as 
his new superior, in the post of 
mana ging director of Hill 
Samuel Investment Manage- 

Last July, too, Mr Maguire was 
given additional responsibility 
for directing the management of 
pension foods' UK portfolio. 

The new formula appears to 
have shown results in the past 
couple of quarters, but it is 
early days, and the marketing 
consequences of the recent 
performance problems will per- 
sist for several years. 

“ It would be unrealistic to go 
out ' actively marketing a 
balanced portfolio service,” 
says Mr Henderson. “We are 
marketing the thing s that we 

have done well in the past three 
years, and also new products.” 

Specialised services include 
international products, such as 
a European fond, and there is a 
UK small companies fluid, 
another specialist area where 
performance has been good 
enough to be marketable. 

Hill Samuel is also moving 
into the quantitative area, 
including index fluids. But Mark 
Henderson is not concentrating 
just on index tracking. “We 
want to take the quantitative 

duct to a number of major 

“ We now offer a whole range 
of specialist services,” says 
Mart Henderson. “ I think It is 
the way the industry is going.” 

technique and apply it to active 
management rathe 

er than pas- 
sive management." he says. 

This has drawn HS to the area 
of tilted portfolios, where it has 
been experimenting internally 
with a number of success fac- 
tors, used to select portfolios in 
conjunction with a database. 

This workhas not yet been put 
into practice, but HS is at the 
stage of talking about the pro- 

Yet the team at Hill Samuel 
Pensions Management is also 
keenly aware that it must focus 
upon the needs of its remaining 
balanced clients, who remained 
loyal through the bad times »nd 
will expect redoubled efforts. 

With “the reserves of client 
goodwill being tested. HS can- 
not afford to neglect Its existing 
client base in the pursuit of 
what, in the short run, may be 
more promising growth areas. 

That isthechaUenge feeing 
Mart Henderson. He aims to 
whether the crisis. “We will be 
back in the balanced business 
in a year or two,” he promises. 

Bany RDey 

Trustees who look for 
probabilities rattier than 
possibilities, look to 

Barings. Barings has a clear investment 

objective in the management of pension funds: performance 

consistendy above the market average. In each of the lasr 
five years we have met that objective by a comfortable 

Our clients know they can rely on the continuity 
of our management team, our consistent management style, 
and our dear and independent investment philosophy. 

The Baring Foundation, our ultimate parent, is a 
registered charity, so we are not vulnerable to external 
influences and pressures. We have the freedom to think 
and act only in the best interests of our clients - and to 
continue to do so. 

Contact Jeremy Clegg, Baring Investment 
Management Limited, 8 Bishopsgate, London EC2N 4AE. 
Telephone: 01-283 8833. 


K , 




Financial Times Thursday May 21 1987 



Management styles 

Small is distinctive 

Generally, such smaller man- 
agers seek to persuade clients 
they are capable of high 
performance, perhaps (though 
not necessarily) with a high-risk 
profile . 

“ We’re old-fashioned fun- 
damentalist investors," says Mr 
Michael Sampson, a director of 
John GovetL “An awtel lot can 
be learnt meeting management 
around a lunch table” 

At the extreme of high-risk 
stockpicking is probably Mr 
•Walter Scott, of Walter Scott 
and Partners, running some 
£4D0m of- international sunrise 
technology investments out of 
Edinburgh for clients who need 
to be braced for wild , quarterly 
the regular 

still the rule for UK- pension 
tends. By this is meant a com- 
prehensive portfolio manage- 
ment technique, which takes in 
asset allocation— the apportion- 
ment of money between diffe- 
rent types of investments such 
as UK equities, gilt-edged and 
overseas equities — as well as 
the selection of -individual 
stocks and bonds. 

The big London -merchant 
banks have been the most 
successful practitioners of this 
approach, and some are now 
running many billions of client 
tends on this basis. 

It is an approach that is 
naturally adopted when pen- 
sion tend trustees are generally swings against 
unfamiliar with investment indices, 
problems. They have been 
drawn to the big banks, which 
can offer comprehensive exper- 
tise and efficiency at the cost, 
perhaps, of individual treat- 
ment, and at the risk of a certain 
degree of anonymity, with tend 
managers being changed 
around with a frequency which 
can annoy clients. 

. In the US, however, balanced 
managers have encountered se- 
vere competition from- smaller,' 
more aggressive management 
firms, which do not claim to 
cover the whole field but offer 
various kinds of distinctive 
styles and specialisations. . 

A bland, balanced formula 
will in the end give a rather 
bland, unexciting performance. 

To get ahead of the crowd it is 
necessary to do something a 
little different 

Such specialist managers 
have tended to find conditions 
rather tough in the UK, howev- 
er. After early success -some - 
years ago. managers such as Iv- 
ory & Sune and Geoffrey Moriey 
have tended to lose clients, 
largely because of indifferent 

But there are now signs of the 
emergence of a new group of 
smaller managers, offering 
more individual and distinctive 
styles. They include relative 
newcomers, such as the recently 
spun-off Newton Investment 
Management, (formerly part of 
insurance brokers Reed Sten- 
houseX together with several 
longer established investment 
trust houses that have moved 
into the pensions field.. 

Examples of these are Baillie 

Another Edinburgh manage- 
ment firm, Martin Currie, better 
known for investment trusts, 
raised eyebrows Last year by 
carrying off a £275m slice of the 
British Rail [tension tend— the 
only small manager to be 
successful in that hotly con- 
tested _ management re- 

. Yet Martin Game's style is 
only slightly different from that 
of the leaders,' such as Mercury 
Asset Management and Robert 
Fleming which were appointed 
by British RaiL It holds only 40- 
45 stocks in a typical UK port- 
folio, an unusual degree of con- 
centration. But it still has a ba- 
lanced, rather than a special- 
ised, wiaqHatft- 

Mr John Wigley, of consulting 
actuaries R. Watson, was in- 
volved in the BR selection pro- 
cess as an adviser; and points 
out that Prudential Portfolio 
Managers, another - mandate 
winner, also offered -a distinc- 
tive approach, thpbigh. the pre- 
cise formula has not been pub- 
lished. M There is diversifica- 
tion within the six managers 
that BR has chosen. Each of 
them has a different style— they 
are not afi clones of Warburg,” 
he says. 

But he feels that British Rail 
was riotready to opt for- highly 
specialised managers. "They 
could have dime it, and maybe 
they will in due course,” he 

' Interestingly, several of the 
big merchant banks are also 
promoting specialist styles 
these days, and are putting them 

forward increasingly as an 

Gifford and Dunedin Fund Man- alternative, or supplement, to 
agexs, both of . Edinburgh; and their balanced service, 
also the London-based John " ^Schroder Investment Manage- 
Govett, now P*rt-„dfutbe dirtedb’-ufe nt, fw ‘instance,- can offer a 
Berkeley Govett group. ‘ whole series of mainly inter- 

national equity specialisations, 
and has accepted appointments 
to run European and Far East- 

sion. 6 ^^ clients. ** 

- One spur to the development 
of distinctive styles is the in- 
creasing acceptance in the UK 
of the indexation of sections of 
pension tends. 

Index tends themselves rep- 
resent an important category of 
specialised product: There is 
then greater pressure on the 
managers of the remaining 
actively managed parts of the 
funds to outperform. This in- 
evitably forces them away from 
the old balanced approach. 

A numb er of other quantita- 
tive investment management 
techniques are also beginning' 
to be offered in the UK, taking 
their place 'alongside the va- 
rious styles and specialisations 
already being marketed. 

But the problem for a pension 
tend that is thinking of 
.abandoning balanced manage- 
ment and taking this route is 
that it will have to find someone 
else to take the asset allocation 
decisions— or the trustees them- 
selves will have to shoulder this 
responsibility. Most are not too 
keen on accepting the extra 

In the US, pension fund con- 
sultants have been ready to 
move into this vacuum. Signifi- 
cantly, many of the UK pension 
funds that are split between a 
variety of highly differentiated 
managers are those of sub- 
sidiaries of American parent 
companies, such as Ford Motor, 
IBM and Rank Xerox, which 
have between six and eight 
managers each. -s 
There are only a few British 
companies with a series of ex- 
ternal managers, including Un- 
ilever. Rolls-Royce and, as 
already mentioned. British 
RaiL These have between four 
and six different investment 

In the UK. the consulting 
actuaries have been rather cau- 
tious about moving into this 
field of asset allocation con- 
sultancy, but they are consider- 
ing whether the time is' right In 
fact, Mercer Fraser, the subsidi- 
ary of the US insurance broking 

S ' ant Marsh McLennan, which 
st year absorbed the former 
British consulting actuaries 
Duncan G. Fraser, is already ac- 
tive In this advisory area. 

’ Bany Rtiey 

UnHevei's Raphe Langham: transactions are monitored dally 

Retaining top in-house teams can be difficult 

When to leave it to the pros 

ONE OF the most important 
changes in the structure of UK 
investment management over 
the last year has been the moves 
by two of the largest pension 
tends, those of British Rail and 
Unilever, to close down their in- 
house management teams and 
sub-contract the work to pro- 
fessional investment houses. 

Their decisions highlight a 
trend towards more specialist 
management, which is expected 
to provide an increasing source 
of revenue for City institutions 
over the next few years, and 
which will help to compensate 
for the contribution holidays 
that many tends are now taking . 

The £5L5bn British Rail pen- 
sion tend, the fifth largest in fee 
UK, announced that it was plan- 
ning to appoint outside mana- 
gers in 1985. In its lengthy selec- 
tion procedure, supervised by 
R. Watson and Sons, the consul- 
ting actuaries, a list of 25 con- 
tenders was asked to complete 
what is reckoned to be the most 
detailed and comprehensive 
questionnaire ever given to 
prospective managers. Alter ini- 
tial interviews, a shortlist of 10 

was drawn up, from which six 
“ balanced tend ” managers 
were finally selected last 

The assets were transferred at 
the year end, leaving British 
Rail's 20-strong department 
with responsibility for property, 
art and other direct invest- 
ments. The department also has 
taken limited responsibility for 
the asset allocation decision of 
the six tend managers, although 
so fer they have not had to inter- 
vene as they are all punning 
objectives considered to be 
complementary (and were 
chosen partly for that reason! 

Unilever’s £2.1 bn tend was 
also advised by R- Watson when 
it decided to follow British 
Rail’s example last September. 
It appointed four balanced tend 
managers, who took over the 
fond’s assets, again excluding 
-property, in February. 

Both British Rail and Unilev- . 
er made their ■ decisions for 
-similar reasons. It was proving 
increasingly difficult, and ex- 
pensive, to recruit and retain a 
team of top investment, mana- 
gers who could cover a wide 

variety of specialist markets in 
the UK and overseas. 

The increasing volume of pub- 
lished financial information has 
made it difficult for any indi- 
vidual fund manager to remain 
a generalist, following all in- 
vestment markets. In addition, 
the ending of the UK stockbrok- 
ers’ commissions cartel last 
October has encouraged invest- 
ment bouses to build up inter- 
nal research and dealing teams, 
which an in-house company 
pension tend could never 

The salaries of top-perfor- 
ming investment managers have 
soared as a result of other 
changes in the UK’s financial 
markets. In particular, the rip- 
ples created by Big Bang and 
the increasing willingness of 
pension fund trustees to sack 
their investment managers for 
mediocre performance has en- 
sured the demise of the lowly- 
paid bureaucrat whose brief 
was to manage institutional 
tends without taking risks and 
to achieve a return in line with 
the average. 

British Rail was able to make 

its sub-contracting decision 
more attractive in cost terms by 
driving a hard bargain with its 
managers over their fee scales. 
Mercury Asset Management is 
believed to be receiving a fee of 
little more than 0.05 per cent 
peryear on the £1.5bn of British 
Rail assets that it manages. 

What is more surprising is 
that both British Rail and Un- 
ilever rejected the specialist 
manager approach, which is 
now highly developed in the US. 
This would have required them 
to make asset allocation deci- 
sions between, say, UK, US, 
Japanese and European 
equities, property and con- 
ventional and index-linked 
gilts, and to assign a different 
tend manager to each set of 

In Its pension tends for over- 
seas employees, Unilever had 
experience of using specialist 
managers but decided against it 
in the UK. According to Mr 
Raphe Langham, the pensions 
officer: “ The whole point was 
that, although our stock selec- 
tion was good, our short-term 
asset allocation had been poor. 

We decided that the people who 
were better at asset allocation 
were the investment professio- 
nals.” The other reason, also 
emphasised by British Rail, was 
that in the UK there are re- 
latively few specialist invest- 
ment managers to choose 

British Rail chose its six man- 
agers because they each had a 
different investment philoso- 
phy. and there was no evidence 
that any significant economies 
of scale could be exploited by 
letting just one or two firms 
manage the entire fund. The 
trustees showed some boldness 
in giving £250m to Martin Cur- 
rie. a small Edinburgh indepen- 
dent firm which has been tur- 
ning in strong performances re- 
cently alter a poor patch in the 
late 1970s and early 1980s. 

The drawback to appointing 
six managers with a similar 
brief and the freedom to allo- 
cate assets between different 
markets is that their decisions 
may neutralise each other: so 
that one manager's under- 
weighting in. say, pharmaceuti- 
cal stocks is offset by another 
manager's over- weighting. The 
outcome, in terms or perform- 
ance, may then be similar to 
running an index-matching 
fund, but at much greater cost to 
the fund in terms of manage- 
ment fees and transaction ex- 
penses. At the extreme, one 
manager may be buying 100.000 
Glaxo shares for the tend 
through the market just as 
another manager is selling 

Both tends, however, insist 
that they are not prepared to 
restrict their managers' free- 
dom of manoeuvre, and do not 
even require them to give the 
right of first refusal on all large 
deals to each other. .Mr Lan- 
gham. however, says that all 
transactions by their managers 
are monitored daily and that, if 
they discover a significant num- 
ber of self-cancelling deals, 
changes may be made. 

Both he and Mr Maurice 
Stonefrost. the British Rail pen- 
sion fund chief executive, agree 
that the structure and relation- 
ship with their managers is ex- 
perimental and may have to be 
changed, although they seem 
prepared to give the set-up a 
trial period of at least three 

Over the next year, other 
mega-pension tends are likely 
to follow their example and con- 
tract out the management of 
their assets. But the disadvan- 
tages of appointing several ba- 
lanced fund managers with 
similar briefs may tempt some 
of them down a different route, 
either appointing specialist 
managers, one for each market, 
or assigning the core 80 per cent 
or so of their assets to equity 
and bond index-matching tends. 

Clive Wolman 

our fund managers 
what to do* 

At Lloyds Investment Managers, 
we don’t simply employ our fund 
managers to do what they are told. 

That would surely be a criminal 
waste of their experience. 

Instead, they are given ample 
opportunity to exercise their skills to 
deliver a consistently strong perform- 
ance for all our clients. 

Over the last five years, they have 
achieved a result of 25 A% per annum. 
Well above the upper quartile result 
for the industry. 

What’s more, sophisticated con- 
trol procedures ensure that all our 
clients do well, not just a select few. 

This doesn’t mean that our fund 
managers are tied to a recommended 
list of stocks. 

Or that they are constrained from 
making tactical adjustments to asset 

What it does mean is that they can 
use their discretion to ensure that our 
clients profit from their experience. 

And fearful of overburdening 
them, we do not allow more than 
8 funds per manager That way, each 

one knows his clients’ portfolios inside 
out. And has time enough to make 
considered market assessments. 

More important still, every single 
decision is based on consistent econ- 
omic assumptions. 

We find close communication the 
best way to achieve this. Working in 
an open plan office ensures a fast flow 
of vital information. 

As for financial rewards, these are 
based on the performance of the team 
as a whole. Consequently, they all pull 

And what is the avowed aim of 
this carefully considered philosophy? 

To continue to provide our clients 
with excellent performance and a 
personal service that’s second to none. 

If you’d like to know more, ring 
01-600 4500 and ask for Keith Jecks or 
Godfrey Hemsley. 

They will gladly fill you in. 





Financial Time* Thursday May » 


| How markets 

have moved 1 

125 Jan 2-100 

London d 

120 FUnAstriaiPk/l §■ 

New York A 

_ _DowJ<v«k .M 

Ordiriary M 

Industrial ■■ 

Average ww 


irw jM 

100 * ifea&g •];*? 

w Jar Feb Mw Apr May Jan Fab Mw Aor May 

1987 1987 

400 Dec 31. 1984-100 

Spain ^ 

300 Marfriii SP HL. 

ltaly aAu Mr 


Com. Its! F* ^3 

inn : 

^ISSS 1986 87 

~ 1985 1986 87 

High returns, even in such previously Ignored markets as Italy and 
Spain, have spurred fund managers to Increase their holdings of 
overseas equities. 

International strategies 

Assess the risk, 
keep your nerve 


were abolished in 1979, UK pen- 
sion funds have significantly 
shifted their portfolios into 
overseas equities. And most 
managers remain convinced, 
short of a Labour election vic- 
tory, that international invest- 
ment will continue to form a 
major part of their asset base. 

Overseas investment can re- 
quire a strong nerve — especial- 
ly in the light of the staggering 
price/eamings ratios demanded 
by many Japanese stocks, and 
wildly gyrating currency move- 
ments like the two-year decline 
in the dollar from around parity 
with sterling to $L70/£. 

But the consistently high re- 
turns achieved overseas, even 
in previously ignored markets 
like Italy and Spain, have spur- 
red hind managers, according to 
WM figures, to increase their 
holdings of overseas equities 
from 6 per cent of portfolios in 
1979 to 20 per cent last year. 

The decline in sterling 
against many currencies since 
the early 1980s peak has 
obviously boosted returns, but 
few managers can foil to be im- 
pressed by figures published re- 
cently which show average 
annual returns over the past 10 
years of 23.4 per cent in Japan 
and 2SL9 per cent in the Nether- 

How do managers decide what 
proportion of funds to invest 
overseas? “ The most important 
thing," according to Keith Jecks, 
of Lloyds Investment managers, 
“is to understand the client's 
aims and liabilities— what the 
trustees are trying to achieve. 
Different clients have different 
Ideas on what constitutes 
acceptable risk." 

Bruce Pullman, a senior assis- 
tant director at County Invest- 
ment Management, illustrates 
the idea. “ It would be appropri- 
ate for a young, immature fond 
to accept a high equity or over- 
seas weighting," he says, “ but a 
mature fond would probably 
need to buy pits to create an 
asset mix that closely matched 
its liabilities." 

There are no clear ideas on 
the ideal proportion of overseas 
investment “ The figure 
changes with fashion," believes 
Mr Jecks. “It was probably 
around 15 per cent in 1979, but it 
is nearer 35 per cent now.” 

The fact that most Hinds’ liabi- 
lities are purely in sterling re- 
ceives some consideration in 
long-term planning, but tends to 
get ignored in the short term. 
“ You just can’t ignore the bet- 
ter returns on offer,” said one 

However, liquidity is one con- 
straint Some markets have 
experienced substantial settle- 
ment difficulties in recent 
years, and few managers will be 
willing to over commit them- 
selves unless they knew they 
could quickly liquidate their 

“ The old system of investing 
abroad,” explains Mr Pullman, 
“was to work out a weighted 
capitalisation for world markets 
and then overweight or under- 
weight countries, depending ou 
your assessment of their pros- 
pects. Having chosen the coun- 
try, you would then work down- 
wards to pick individual sectors 
or stocks, and the result would 
be that you would end up with 
around four to five stocks in 
each of a few countries.” 

While that relatively un- 
sophisticated strategy worked 
well before 1979. it ran into 
problems when analysts started 
to find that many managers 
were underperforming market 
indices overseas. “We felt it 
was time to pay more attention 
to the benchmarks against 
which we are being judged,” ex- 
plains Mr Pullman. 

County switched to using an 
optimisation model in 1983. 
Such models come in various 
shapes and forms, but their 
essential characteristic is the 
assessment of the risk/reward 
trade-o Ha in investment deci- 
sions. The latest ideas from the 
United States use a technique 
close to chart analysis in an 
attempt to get the timing as well 
as the substance of decisions 

Fund managers tend to be 
sharply divided on the merits of 
some of the more arcane techni- 
ques on offer. “ Most of the mod- 
els are bunk," believes Peter 
Scott director of international 
investment strategy at Gartmore 
Investment Management 

But Arif Sherani, senior 
economist at Banque Paribas 
Capital Markets, is more san- 
guine about their usefulness. 
“ Models have three advan- 
tages— they impose an internal 
consistency on yoor arguments 
so, if you make wild assump- 
tions, you get pretty wild re- 
sults. They also allow you to 
quantify your assumptions. And 
when you do get sensible results 
out of the model, they can be 
used as a starting point for your 
asset allocation decisions.” 

County tends to use its model 
in a slightly different way. First 
it makes assumptions about the 
returns it expects in the short 
and medium terms from diffe- 
rent markets: then it feeds those 
into the model to try and build a 
picture of the best portfolio that 
is consistent with those assump- 

Some fond managers try to 
separate the currency from the 
market investment decision, 
and thus use options or the for- 
ward markets to lock in an ex- 
change rate. Not everyone 
thin ks such a strategy is wise. 
“Both the currency and the 
market risk are unstable.” be- 
lieves . Mr Pullman, “ bat com- 
bine them and one diversifies 
the other.” 

A different kind of hedging is 
portfolio insurance, which 
attempts to allow investors to 
“ lock in ” gains by buying and 
selling stock index futures— the 
aim is to invest in equities as 
the market rises, and to switch 
into cash as it falls. In the US, 
some $80bn of funds, close to 6 
per cent of the market, is co- 
vered this way. 

In the UK, there has been 
some concern about the liquid- 
ity of the FT-SE futures market, 
but that objection has been 
overcome in recent months. In- 
surance will surely look a lot 
more attractive in a bear mar- 
ket-figures show that a pro- 
tected fond that started in the 
early 1970s would have outper- 
formed the market by about 5 
per cent per annum. That result 
is boosted by years like 1974 
when the market fell by 53 per 
cent and a protected fond would 
have risen by 0.4 per cent 

Pure indexation is a popular 
strategy in the US, particularly 
with regard to overseas mar- 
kets, but has yet to gain univer- 
sal acceptance in the UK. “It 
seems to make the fond mana- 
ger’s expertise worthless,” com- 
plained one manager, but like 
insurance, indexation will prob- 
ably grow in popularity, particu- 
larly in some of the smaller 
equity markets. 

All these strategies might be 
rendered obsolete if next month 
saw the election of. a Labour 
government committed to re- 
ducing the percentage of port- 
folios invested overseas to 5 per 
cent with the added hint that 
some of the returned moneys 
should be invested in a National 
Investment Bank which would 
pay a return similar to that on 

Fund managers seem grud- 
gingly to agree that Labour's 
strategy would actually achieve 
its aim. “ Labour’s tactic of us- 
ing withdrawal of tax privileges 
to cause funds to be repatriated 
would probably be effective," 
believes Lloyds' Keith Jecks, 
“although over a period of 
years ”, 

Some believe that managers 
will eventually find a way round 
the rules— perhaps by moving 
assets offshore. Others feel that 
part of the City would move 
away from London and concen- 
trate on overseas clients. 

Whether the scheme would 
succeed in its larger aim— of en- 
suring that British industry had 
adequate sources of foods, is 
more open to doubt “Hot 
money flying out of the country, 
as overseas investors reacted to 
a Labour victory, would be more 
significant than pension money 
coming back in," believes Mr 

Certainly, there has been 
little sign that the market is 
inclined to reduce overseas hol- 
dings ahead of an election— 
which would be illogical, since 
so much of the rise in the UK 
market has been caused by the 
expectation of a Tory victory. So 
if Neil Kinnqck does make Num- ■ 
ber Ten, there could be some 
worried frowns on fund mana- 
gers’ feces on June 1L 

Philip Coggan 

As trustees have become more demanding about return s, even the 
most cautious institutional investors have been forced to diversify 

Overseas equities spartde 

The Japanese market* 

186 &— ahowiof that fired siana- 
ita not vet believe that 

properly, has been overturned Europe 5 per cent of total port- oversessin vestora . . 

in the wake of the abolition of folio* Part of the explanation avoid, was the best performing- 

for the rise in European stock 

exchange controls and almost 
continuously rising stock , mar- 
kets around the world. 

Returns have been consistent 
above historical -averages and 
actuaries’ estimates. Last year, 
a WM survey found that UK pen- 
sion funds, boosted by an 
increasing willingness to revest 
abroad, averaged 2Z5 per cent 
on assets. 

The star performers of the 
asset categories were overseas 
equity markets, which showed a 
return of 40.8 per cent, but UK 
equities achieved an extremely 
respectable 27.4 per cent. 
Although overseas bonds. 

markets is the fact 
institutional investors around 
the world have been diversify- 
ing in the wake of exchange con- 
trol relaxations— < 80 , to a certain 
extent, the good returns on pen- 
sion fund investment have been 

But the more fondamental 
reason was the rmprovedLent In 
the European economies as they 
emerged from the early 1980's 
recession. The long program- 
mes of cost-cutting enabled 
companies to improve profits 
sharply as their economies 
expanded— even stock markets 
in countries like Italy and Spain 

few manager* matched the 
index. Many investors remain 
unhappy with the market, espe- 
cially in the light of the stratos- 
pheric p/e ratios being deman- 
ded by some stocks at the 
moment; some have reduced 
their exposure to zero because 
of their unease. 

The US market Is a more 
traditional outlet for overseas 
investment— but the conlinning 
decline of the dollar since early 
1985 has lessened its attraction, 
as have the recent fears of a US/ 
Japan trade war. 

Fixed-interest bond returns 
have produced tremendous one- 

interest bonds (o lucre*** tt**? 
weighting withui foods’ port- 
folio*. But 1988 mw no sign of 
managers expecting such an 
equity downturn as UK mana- 

S r* reduced their weighting 
m 16 per cent to 13 per cent. 
Property yield* have simply 
been unable to keep «P with 
equity return*, and such « tene- 
ment as there has been tat the 
sector ha» been concentrated on 
retail rather than office or com- 
mercial sites. A* inflation ba> 
declined, so the supposed 
“inflation hedge” attractions of 
property interests have also 
been reduced- . _ , 

It la not so much that fond 
managers have sold their 

ssrsssrsrzzss sssssssssssss m 

tion. recorded a 24.4 per cent .Hunti/m tremendous years over the past that they have been reluctant 

- put new money into the sactor. 
Perhaps the attempts at Increas- 
ing the liquidity of the sector via 

tion. recorded a 24.4 per cent attention 

SSi3SSl SSiASSSi However, there Is a limit to 

meats had little hope of keeping the extent of UK pension foods' interest rates, hat caused sharp 

t-w . interest in such markets— rises and foils in bond prices. 

Xne return on U& dodos was 

decade — as the volatility of 

12.8 per cent; on index-linked 


about liquidity and However, by their very nature, the various schemes of 


will entice ixrves- 

... 0 ■ rcuujurcuL difficulties' make bonds cannot keep pace with a — ----- - . 

gilts, 6.8 per cent; UK property m ana gprt reluctant to overcom- long-running equity bull mar- tore back to this tradina 
A3 per cent; overseas properly ^ ^emselves— especially in ket. It is interesting to note, home of institutional fond*- 
6.3 per cent; and cash 1L3 per j^in-up to a general election though, that the proportion of When one turns to the_alloca 
'*** that might be followed by index-linked gilts within port- 

restrictions on overseas invest- folios has stayed fairly stable 


Those figures rounded off a 
decade of substantial returns in 
equity markets around the 
world. Figures in Pensions Man- 
agement magazine show aver- 
age returns for the years 1976-85 
for the following equity markets 
ofc US 1&2 per cent, Japan 23.4 
per cent, UK 22.4 per cent, Ger- 
many 185 per cent, Switzerland 
18 per cent, France 17.2 per cent 
and the Netherlands 22.9 per 

A* trustees have become more 
demanding about the returns 
they expect from their mana- 
gers, even the most cautious of 
institutional investors ■ have - 
been forced to diversity their 
funds to take advantage of the 
higher returns on offer. 

The WM survey found that, 
between Z979 and 1986, the per- 
centage allocation of assets 
changed as follows: UK equities 
rose from 44 per cent to 51 per 
cent overseas equities from 6 
per cent to 20 per cent; UK 
bonds fell from 23 per cent to 13 
per cent overseas bonds moved 
from nil to just under 1 per cent; 
index-linked from nil to 3 per 
cent; UK property foil from 22 
per cent to 8 per cent; overseas 
property rose from nil to 1 per 
cent; and cash fell from 6 per 
cent fd 4 per cent 

since they were introduced in 

The 23 per cent return tvaa Interesting, too 

tion of new money in 1986, the 
trends noted over the seven- 
year period since Mrs Thatcher 
took power are even more pro- 
nounced. UK and overseas 
equities were the home for 73 
per cent of the money received 
by pension fonds in 1966. com- 
pared with only 40 per cent in 
2979. In contrast, UK bonds and 
property, which together 
attracted 54 per cent of new 
money in 1979, received only 15 
per cent of fund managers 1 new 
allocations last year. 

The healthy rises achieved by 
most stock markets so for this 
year is likely to mean that the 
shin from bonds and properties 
into equities will continue, 
Much will of course depend on 
the result of the election, which 
could bring into power a Labour 
government committed to 
reducing the proportion of over- 
seas investment to 5 percent of 

But it would be particularly 
Intriguing to see how the cur- 
rent crop of fond managers, 
struggling to outperform rising 
stock markets on three-month 
performance criteria, would 
cope with a bear market ? Many 
must be hoping that the issue 
will remain a strictly theoreti- 
cal one, 

nab Coggsui 


Temple Bar 

The Small Companies Fund 
The Unlisted Securities Fund 

Guinness Mahon Investment Managers 

manage over £80 million of investments in 
smaller companies on behalf of many pension funds 
including 5 of the top 20 largest UK funds 

If you are a large pension fund 

needing an investment manager 
who understands smaller companies 


If you are a small pension ftind 

requiring an investment manager 
who understands your needs 

Call Ian Richards 

Guinness Mahon Investment Management 

32 St Mary at Hill London EC3P 3AJ 
Telephone: 01-623 9333 
Facsimile: 01-283 4811 
Telex: 884035 


Financial Times Thursday May 21 1987 

*■-. S\\K 

"'I ’’I 





Big Bang has brought new patterns in remuneration . 

PENSION FUNDS have 'been 
the biggest beneficiaries of last 
October’s Big Bang. The uphea- 
val In the London stock market 
has led to cuts of more than SO 
per cent In their costs of share- 
dealing and investment man- 

The reduction comes . from 
five different sources. The most 
obvious cut was the halving of 
the rate of stamp duty to (X5 per 
cent In October. This brings 
London more into line with 
other financial centres, though 
it is stW uncompetitive with 
stamp-duty-free New York. 

Second, institutional inves- 
tors, particularly those larger 
firms which have their own 
dealing desks, have been able 
for the first time to go directly to 
the market makers to buy and 
sell shares, and by-pass the 
stockbrokers. In the first three 
months after Big Bang, an aver- 
age of SO per cent of equity deals 
were done directly with the 
market makers, although since 
the New Year the proportion 
has fallen to about 40 per cent 
Almost all- deals in gilt-edged 
securities are done directly 
with the market makers. ' 

Third, the market makers 
themselves are generally char- 
ging narrower spreads between 
their bid and offer prices, par- 
ticularly on the larger deals of 
greater than normal market 
size. For a £i.m deal in the most 
actively traded alpha securities, 
the spread between the best 
buying and. selling prices has 
fallen fiom about 1.3 to 0.75 per 
cent. Even on smaller deals, say 
£50,000 on a beta security, the 
spread has fallen from L9 to 1.65 . 

Five sources of savings 

per cent. • ■ 

The fourth factor has been the 
cut in commission rates. For a 
£50,000 bargain, the average 
rate for institutional investors 
has fallen Grom CL53 per cent last 
July to an estimated 0.3 per 
cent For a £500,000 bargain, the 
rate is down from 0.31 to slightly 
above 0-2 per cent The larger 
pension funds have generally 
negotiated a flat 0.2 per cent on 
all except the very largest deals. 

The pre-Big Bang commission 
rates are misleading, however, 
because they reflect the conces- 
sions, known as continuations, 
that were granted to the larger 
investment managers. They 
were able to lump together all 
the transactions in a single 
security for their different 
clients over a three-month . 
period as one transaction, and 
thus benefit from lower commis- ‘ 
sion rates. Most managers failed 
to pass on these concessions to 
their clients, although the rise 
of Independent fund managers 
in recent years has encouraged 
a shift towards explicit fees 

Last year, there were dire pre- 
dictions from hind managers ' 
who feared that Big Bang and 
negotiated stockbroking com- 
missions would mean the end of 
continuations, while a tougher 
regulatory regime under the 
1886 Fi andal Services Act 
might stop other hidden forms 
of remuneration. The conse- 

as well as in dealing 

Agency business 
regains ground 

SEVEN MONTHS after the 
Stock Exchange’s Big- Banff 
restructuring of trading and 
commissions, institutional 
Investors are settling down to 
their new-pattams of dealing In 

Before Bfg Bang all business 
had to be done through agency- 
brokers, but the new trading 
system made it possible fbr 
institutions to deal on a so-cal- 
led net basis, without payment, 
of commission. 

In the early weeks after Big 
Bang some of the more macho 
institutions, in particular, the - 

the agency brokers and going 
straight tfe^ennaxkek makers. 
But since ''then Thar balance 
appears to have . swung back 
somew hat towards - agency busi- 
ness. ‘ 

There is a feeling that the 
brokers have, by now sorted out 
which are the good clients and 
which are loth to pay commis- 
sions. The more niggardly 
clients can no longer assume 
they will receive research and 
other services regardless. 

Widely different attitudes 
persist, even among apparently 
similar large institutions which 
manage pension funds. Two 
clearing bank subsidiaries pro- 
vide good examples of the 
varying stances. 

County Investment Manage- 
ment (owned by National 
Westminster) does some 80 per 
cent of its UK equity business 
on an agency basis. 

Generally speaking, it deals 
almost entirely with agency 
brokers except on special deals 
such as large placing*. or so- 
called “basket” trades which 
involve whole portfolios of 

In sharp contrast, Barclays de 
Zoete Wedd Investment Man- 
agement transacts 70 per cent 
on a net basis for pension fund 
clients, at any rate in the biggest 
hundred or so “ alpha ” stocks 
(with the less highly capitalised 
betas the trend is said to be 
shifting a little more back 
towards agency business). 

A third example is Prudential 
Portfolio Managers, which has 
arrived at a different solution 
a gain, a split of 45 per cent 
agency against 55 per cent net. 
which apparently has not 
changed much since Big Bang 

Why pay any agency commis- 
sion, even if the rate is only half 
what it used to be? Boy Peters, a 
director of County Investment 
Management, lists various 
reasons. Thus an agency broker 
is required to seek best execu- 
tion, and can also provide 
anonymity which an institution 
will lose if it tries to check nut 
the market directly. These fac- 
tors are important on difficult 

Moreover, fluid managers 
need to pay for research, which 
it is uneconomic for each 
institution to provide for itself 
independently. . 

There is also a desire to pay 
for a better service, .such as the 
first telephone call with an 
interesting story. In some 
circumstances, too, brokers are 
in a position to perform favours 
for their best clients, as in 
allocating stock in privatisation 

1S At*PPM, Mick Newmarch, the 
chief executive, takes the 
pragmatic line that “we are 
eager to reward people who 
help us." But he says that be is 
very disappointed at the duality 
of post-Big Bang research, one 
of the most important services 
which he is seeking from 

“We hoped that negotiated 
commissions would free brok- 
ers to be more serious about 
research,” he says, “ but there 
has been a discernible 
deterioration,” Mr Newmarch 


complains that there are fewer 
in-depth reviews, and .that the 
internationalisation of research 
has not been very impressively 
done. * ^ .. 

.Other fbnd managers do not 
appear to have noticed quite 
' ■such a decline in the quality of 
research, though they suggest 
. that analysts may be concentrat- 
ing on telephone work rather 
than printed circulars. . 

If so, one of the Pru’s rivals 
points out, it may be that mana- 
gers like the Pru which are 
aggressive on commission rates 
may not be getting the top qual- 
ity service which they .expect 

Certainly the smaller pension 
fund*- managers - tend to - be 

little’ more than thefstandard 02 
per cent,.in order to be sure of 
getting the best treatment 

A big flin d man agement busi- 
ness like BZWIM— which runs 
over £Hbn. not all for pension 
fiinds— can afford to be rather 
tougher; it is too large for brok- 
ers to shun. 

But one reason, for its some- 
what greater emphasis on net 
trading may be that it is the 
leader in index funds fit man- 
ages some £2bn on an index- 
linked basis) and clearly there 
is little point in paying commis- 
sion and receiving research 
when buying and selling are 
largely determined by computer 

In other areas, however, 
BZWIM is keen to keep brokers 
happy by allocating commis- 
sions. “We want the early 

S hone call,” says Ala n Fo ster, 
eputy chairman of BZWUL 
He points out that it is impor- 
tant to control the 'basis on 
which fUnd managers transact 
business. Fund ' managers can' 
deal on an agency basis, but 
must not do net bargains, all of 
which have to be passed to .the 
specialised in-house dealers. 

The reasoning is that BZWIM 
most be able to show that it is 
getting best execution on behalf 
of its own clients. Only skilled 
dealers can be confident of get- 
ting the best prices, when they 
deal directly . with market 

Another challenge posed by the 
Big Banff changes has been to 
the elaborate system of “soft” 
commissions which has grown 
up to facilitate payment by fund 
managers for certain services. 
For instance, performance 
measurement has frequently 
been paid for by passing busi- 
ness to a sponsoring, broking 
firm. The information service 
DataStream was frequently 

paid fbr on this basis in its early 
days, when it was associated 
with brokers Hoare Govett, and 
the practice has tended to 
spread. . . 

However. - the commission 
reductions following Big Bang 
have raised questions about 
such practices. “We' shall 
advise our clients not .to 
perpetuate soft commissions,” 
insists Mick Newmarch, of 
Prudential Portfolio Managers. 
“Soft commissions will inhibit 
PPM’S negotiations on fees.” 

Some other managers tend to 
like soft commission' arrange- 
meets, however. They can be 
used to ensure that thecltents 
pay for services directly, and 
that the burden does not fall on 
the managers. This may be 
acceptable fbr performance 
measurement, but it is less 
obviously desirable for, say. 
Reuters screens, which might 
be thought to be chargeable to 
the manager’s account. ' 

Regulatory bodies, like the 
Investment 'Management Reg- 
ulatory Organisation . (Imro), 
may have to rule on this in due 
course. For the time, being the 
draft Imro rule-book is relying 
on disclosure rather than on 
rigid yes-or-no decisions- l 

Barry fflley 

quence would have to be a prob- 
able doubling of their manage- 
ment fees, they said. 

In fact, less than half of invest- 
ment managers have raised 
their fees, and even their in- 
creases have been modest. For a 
balanced fond of £10m to £50m 
in UK and overseas equities, the 
going fee rate is between 0.15 
and 0.25 per cent which makes 
London and Edinburgh the 
cheapest centres for professio- 
nal portfolio management in the 
world. The largest foods have 
been even more aggressive in 
cutting their investment man- 
agement foes. In some cases to 
below 0.1 per cent 

One reason for the modest in- 
creases has been the sharp rise 
in world stock markets since the 
autumn, which has boosted the 
value of pension fond assets and 
thus their actual management 
fees, which are calculated on a 
percentage basis. 

A second factor has been the 
intensifying competition from 
insurance companies, US in- - 
stitutlons and the passively- 
managed index-matching funds 
which charge as little as 0.01 per 
cent per year to manage around 
£100m of assets. 

But perhaps the most impor- 
tant reason is that some fund 
managers are continuing to be- 
nefit from hidden forms of re- 
muneration. Big Bang for 
example, has not affected the 
commission-sharing arrange- , -• * 

ments, or the use of high-char- 
ging in-house unit trusts, for 
overseas investments which 
account for a growing propor- 
tion of the total Mercury Asset 
Management, for example, in its 
share prospectus, in March, 
admitted that its additional 
commissions and charges on 
overseas transactions were a 
“ particularly important ** 
source of revenue. 

Even when pension fond trus- 
tees understand what is going 
on, they often prefer their 
charges to be paid indirectly, 
out of the investment returns of 
tbe fond, rather than explicitly. 
In local authority pension 
foods, for example, investment 
management fees come directly 
from the ratepayers and may 
have to be approved by the au- 
thority’s politically-led finance 
committee, whereas stockbrok- 
ing commissions and continua- 
tions are taken directly out of 
the fonds. 

Many of the large banking 
groups which have acquired 
stockbroking firms originally 
planned to integrate their brok- 
ers’ fond management opera- 
tions into their own. However, 
they have had to allow the brok- 
ers' pension fond clients to con- 
tinue to be serviced directly by 
the broking arm, so that they 
can pay out of the now artificial- 
ly inflated commission levels 
rather than through fees. 

. The new regulatory regime is 

not proving to be as hard as 
expected on hidden benefits. 
Despite their tough statements 
of principle, the officials of the 
new self-regulating body, tbe In- 
vestment Management Regula- 
tory Organisation (Imro), have 
had to water down their rules on 
hidden benefits by their own 
committee, which is dominated 
by practitioners. The Securities 
and Investments Board also has 
backed away from imposing any 
radical changes. All forms of 
hidden benefit will be permit- 
ted, provided they are disclosed 
in some form or other, even 
though the foil implications 
may not be spelt out 

Some investment institutions 
have complained to Imro that its 
rules will let in a new type of 
covert continuations benefit, re- 
shaped for the post-Big Bang 

dual capacity market Fund 
managers will be able to buy 
shares cheaply and then pass 
them on to their clients at a 
higher price; or, conversely, to 
charge a mark-down on shares 
sold by their clients. It will 
often be impossible to ascertain 
what price the client could have 
obtained bad he dealt for him- 
self particularly in a large line 
of stock. Most pension fond trus- 
tees are unlikely to be able to 
judge how much of the dealing 
price they are giving away to 
their investment managers. 

Thus, for the smaller pension 
fund at least the fifth source of 
potential savings in tbe post-Big 
Bang era, lower total invest- 
ment management fees, may 
prove difficult to realise. 

Clive Wolman 

77m* fiitenintinnnl Investment (in if /ft 
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Henderson - Pension Fund • Management 

It’s that time of year. 

Companies and trustees are reviewing the investment 
of their pension finds. How well have they performed? 
Can they improve ? 

1986 was another good year for real rates of return. 
Henderson achieved a median return of 28.9%. 

Whilst we’re happy about our 1986 results, were even 
happier with the consistency of our above average 
performance over the last five years: a median return of 
26.0 % p.a.for the five years ending 31st December 1986. 
But we know what matters most of all is our performance 
over the next fve years. 

Our goals and strategy for 1987 and beyond are 
similar to those that brought success in the past. To match 
or outpace inflation, in the long-term, our strategy 
concentrates on investing in real, rather than monetary 
assets . Our decision-making process will continue to 
balance central control and manager discretion, with 
continual monitoring and review. 

We’re always looking for good long-term performance. 
As no doubt you are. 

For more information, please ring Mike Anthony or 
Richard Garland on 01-638 5757. 


The Investment Managers. 

Henderson * pension Fund • Management 


Financial Times Thursday May Zl 1B87 


institutional responsibilities 

„ .... . -r—Tr*--— 

Wanted: a short term remedy 

THE FINANCIAL world is. 

increasingly, divided into two 
camps: those who believe that 
the stock market is the efficient 
sum of all human knowledge, 
and those who claim that it is 
short sighted and irresponsible, 
dominated by speculators with 
very short-term time horizons. 

In the past year or two. the 
market's critics have been gain- 
ing the upper hand. The concept 
of market efficiency, hitherto 
more or less unchallenged in 
academic circles, has been 
questioned. More seriously, 
there has been growing concern 
about the evident priority given 
by institutional investors to 
short-term investment perform- 

The pension funds, in particu- 
lar, have been under attack. In 
the closing stages of contested 
takeover bids, they have time 
and again shown themselves to 
be more interested in the odd 
penny per share than in long- 
term strategic arguments. 

There are a number of 
explanations for this 
preoccupation with short-term 
performance. Perhaps the most 
obvious is that the level of 
speculative activity always 
tends to rise in bull markets. 
This can be best illustrated with 
figures from the New York 
Stock Exchange, which has a 
long run of data. In 1981— just 
before the big bull run— the 
turnover ratio on the Big Board 
(reported share volume as a 
proportion of total shares 

listed) ran at 33 per cent By 
1986. that figure had climbed to 
64 per cent, by far the highest 
level seen since the great crash. 

Other reasons include high 
real interest rates — which have 
forced both companies and 
investors to look for very high 
rates of return from long term 
investments. Companies* time 
horizons have also been shor- 
tened by the shock of 1981, 
which led them to place much 
greater emphasis on cash man- 
agement at the expense of large 
scale investment projects. 

The investment institutions 
have been encouraged to higher 
levels of activity by a prolifera- 
tion of new financial products 
together with the lower transac- 
tion costs which have resulted 
from Big Bang. And as more and 
more pension ftmds are 

cases, management felt that the 
City had failed to grasp their 
long-term strategies, but it 
turned out that investors’ mis- 
givings had been only too well 

ment into the hands Of indepen- Havalnnmpnt cnarutino 

For the most part, however, 
“ short termism” is seen to have 
adverse results for the economy. 
The standard complaint is that 
it discourages companies from 
investing in their future— 
through research and product 
development which tends by its 
nature to have a long-term 
payback. And it encourages the 
growth of companies which are 
primarily interested in finan- 
cial management— a steady rise 
in earnings per share and an 
active fan club in the City. 
According to their critics, they 
swallow xjp soundly based 
manufacturing companies, and 

However, there is no reason to 

think there has been any lasting 

shift in investors' perceptions. 
The problem is 'that institutio- 
nal investors are now by a wide 
margin the main owners of Brit- 
ish equities: the pension ftmds 
alone are reckoned to control 
about a third of listed equities. 
Yet for the most part, they foil to 
act like proprietors. Rather 
than exert direct influence on 
the management or poorly tun 
companies, they prefer to Seek a 
predator to do the job for them. 
And well run companies fear 
that they cannot count on their 
shareholders' support through 
lean times. 

These anxieties about the 
responsibilities of institutional 
investors have become a politi- 
cal issue, and not one which is 
just confined to the Left. They 
led directly to the CBFs attempt 

development spending and sell- to build a bridge between Indus- 
mg off outlying artivitia.AMet tty and ttoSt, .through fhu 

ary powers, so the business has 
become more competitive and 
performance measurement has 
become more important 
The consequences of a higher 
level of activity are not all bad. 

stripping, it used to be called. 

There have been signs in the 
past year that the pendulum has 

been swinging in the other 
direction. The hostile reaction 

working party .which is now 
under way. and they have 
brought calls for change from 
within the financial and govern- 
ment establishment 

Mr Dawid Walken ■ personal erased* 

Greater volume in a market to BTR's unsuccessful attempt 
leads to greater depth and atPilkingtonisfoemostobviotus 
liquidity, and helps to reduce example of a change in fashion, 
the cost of capital. Sleepy mana- and there have been other 

there are suggestions that □Greater disclosure. Instltutio- 
arrangements should be set up nal investors should be 

At one extreme, it has been 
suggested that “ short termism " 
should be subject to tax penal- 

wic wuak tii u«wh«-' <uiu umc nave ucca OUICT ties, either through the — — ---- . 

gers are forced to look over examples of bids being turned re imposition of some form of to allow investors to act in con- expected to report on an annual 

their shoulders, and those who down which might well have short-term capital gains tax, or cert if they wish to bring about basis the turnover or amereni 

become swept away by grand succeeded if short-term con- through the removal of tax pri- changes in a company without parts of their equity portfolio, 

visions of a distant future tend siderations had been all -im par- vileges from pension ftmds putting it on the auction block. Questions could then ne asaeu 

to get brought to earth with a taut. One recent ease was the which turn over more than a One idea is that the Bank of about unusual levels or activity, 

bump. Good examples of this failed bid by Williams Holdings certain proportion of their port- England might act as a sprt of. especially if— oftenseems »■ 
are Thom-EMI and STC. In both Tor Norcros. folio each year. At another, informal clearing house in such 



A servant called master trust 

peculiarly American phe- 
nomenon, is becoming 
increasingly common in the UK 
And although the British pat- 
tern is still nothing like as com- 
plex as across the Atlantic, 
where corporate pension mana- 
gers often sit at the centre of an 
elaborate web of specialist 
managers, there are rapid 
changes taking place. 

Extreme cases include the 
British subsidiaries of US 
multinationals, while the newly 
privatised aero-engine company 
Rolls-Royce lists five main man- 
agers plus seven international 

Chase Manhattan has just 
completed a survey of 29 UK 
company pension . funds 
selected at random from the 
near-250 funds with assets of 
over EXOOm. The average value 
was £887m, and for the 81 per 
cent which were managed 
externally the average number 
of fund managers was between 
five and six. 

So far, however, most funds 
are only experimenting with the 
new kind of structure, and the 
logic of dividing money between 
different investment advisers 
has not been ftilly worked out 
There is an obvious risk, for 
instance, that different mana- 
gers will be buying and selling 
the same shares at the same 
time, creating needless dealing 
activity which cannot be to the 
benefit of scheme members. 

Mr Roger Urwin, of pension 
consultants Mercer Fraser, has 
been involved in the develop- 
ment of asset allocation models 
which have regard to the liabili- 
ties of schemes. 

Depending on the extent to 
which the liabilities are fixed — 
as with deferred pensions — and 
the extent to which they are 
linked to final salaries, diffe- 
rent allocations should be used, 
according to an optimal modeL 

However, many schemes sim- 
ply use a balanced manager, 
who makes his asset allocation 
decisions according to purely 
investment criteria — that is, 
which market seems likely to 

yield the best returns over a 
short-to medium-term forecas- 
ting period. 

Alternatively, it is possible to 
buy the asset allocation service 
separately, with the money then 
being apportioned to individual 
specialist managers. 

According to Mr Urwin, some 
funds are moving towards the 
pattern of setting up a balanced 
core fund together with a series 
of specialised satellites. 
“That’s a situation that is cer- 
tainly becoming more popular. 
But specialisation in the UK is 
In its infancy," he says. 

If specialisation is to develop, 
the range . of other services 
available to pension schemes 
will have to be improved- At 
present, many services, such as 
custody and accounting, are 
bundled into the comprehen- 
sive, balanced service provided 
by the big managers, such as the 
leading merchant banks. 

The true costs have usually 
been disguised, largely because 
of the ability of the integrated 
merchant banks to earn 
revenues through commission 
sharing, and although this has 
now come to an end in the Lon- 
don market, there are still often 
lucrative transaction fees 
charged on overseas deals. 

Even performance measure- 
ment is often paid for through 
“ soft " commissions, even 
though this service is actually 
carried out by independent 

sion to conduct its survey. It is 
considering whether a US- style 
master trust concept can be 
introduced into the UK 

There are bound to be major 
differences of application in the 
UK where as yet there is 
nothing like the Employee 
Retirement Income Security 
Act (Erisa), which has proved 
such a burden to US pension 
plan trustees and such a boon to 
a multitude of advisers and pro- 
viders of specialist services. 

However, Elizabeth Vann, of 
Chase's global custody depart- 
ment in London, claims that the 
survey indicated there could be 
scope in the UK pensions indus- 
try. “It was a very positive 
response," she suggests. “As the 
UK moves towards the US pat- 
tern. so the scope for master 
trust services will expand.” 

Two of the 28 ftmds are 
already actively considering a 
master-trust type of arrange- 
ment she suggests. Another of 

the US leaders in the field. 
State Street Bank, is also 
interested . in developing the 
British market 

Master trust is a range of ser- 
vices rather than a single pack- 
age. It can include custody, 
reporting (including reports to 
regulatory bodies), perform- 
ance measurement cash man- 
agement and as&etiliability 
modelling (similar to that 
offered by Mercer Fraser). It 
can also take in the record keep- 
ing of scheme members, the sort 
of number-crunching often car- 
ried out St present within com- 
pany pension departments. 

Master trust servfces are used 
by three-quarters of all medium 
and large US pension ftmds. 
The big banks are keen to break 
Into a corresponding market in 
Britain. But first they will have 
to persuade pensions managers 
that the fees represent value for 
money. Bany Riley 

be the case— high trading does 
not lead to an above average' 
performance. There might also 
be a case for greater disclosure 
about the response of indi- 
vidual institutions to particular 
takeover bids. 

However, such an approach 
would be likely to be greeted 
with intense hostility, and not 
just from the companies con- 
cerned- In the words of Mr Sta- 
nislas Yassnkovich. chairman of QCompames, too, should reveal 
Merrill lynch Europe, “ It more about their spending on 
would edge us towards a research and product develop- 
corpora tist system which would ment, and give some ideaof the 

not be in the long-term interests 
of capitalism." 

He is strongly opposed even to 
such limited forms of collective 
activity as the recent efforts by 
institutional investors to pre- 
serve pre-emption rights. 
Although big investors should 
make their voices heard by the 
management of the companies 
In their portfolios, they cannot 
claim to act for all shareholders 
since they often have conflicting 

Between the two extremes of 
tax penalties and collective 
action, there are. other ways of 
.encouraging' .a. .more stable 
relationships . between 

expected returns. Mr Walker 
has proposed an innovation 
statement, which would com- 
prise an indication of total 
spending on new products or 
services that are expected to 
reach the market in, say. one. 
three and five years' time. 
□Companies have a legitimate 
interest in the management of 
their pension ftmds, particu- 
larly in the degree of invest- 
ment risk appropriate to their 
circumstances. Boards should 
encourage trustees to be dear- 
in -their policy instructions to 
their investment managers. For 
thqlr part,- trustees should not 
Are managers if an agreed risk 
strategy has led to « disappoin- 
ting performance - over the short 

panies and theh-.big investors. 

-Many- of.. them have, been pet 
forward by Mr David Walker, term. 

director of the Bank pension fund managers "are' 
of Engla n d, who in a series of* ^ agents of their trustees, 
speeches in foe past two years ^heir patterns *of behaviour 
has made foe issue something of ^ust, in foe end. be set by foe 

- attractive M °» 1 ° **“ «•* tteir bU1S - 

ideas are: 

Richard Lambert 

But there is a possibility that 
f disclosure, and 

greater levels o: 
foe effect of changes in the 
structure of the financial mar- 
kets. will lead to foe unbundling 
of many of costs and revenues 
associated with pension fund 
If so, independent providers 
of such services may be able to 
compete, whereas at present 
they stand little chance of char- 
ging foes to scheme managers 
who think they are getting such 
services for nothing 
The desire to break into the 
business of providing ancillary 
services to pension funds lay 
behind Chase Manhattan’s deci- 


1987 TOP 500 

Publication Date: 1st My 1987 

The eighteenth edition of the TOP 500 will be 
published in the JULY issue of THE BANKER. This credit 
analysis and ranking of the world's 500 largest commercial 
banks is acknowledged by Central, Commercial. Investment 
and Savings banks and corporate treasurers throughout the 
world to be the most authoritative comparative data published. 

Each year THE BANKER has added new data to the 
information base which, combined with the previous 17 year 
historic performance research, provides the universally 
accepted material necessary for inter-bank comparison. It is 
used continuously by bankers and corporate treasurers in over 
135 countries throughout the year. 


1 Size by assets 

2 Total deposits 

3 Capita] and Reserves 

6 Pre-tax earnings on assets (%) 

7 Pre-tax earnings on capital (%} 

8 Capital/ Asset ratio 

4 Net interest income 

9 Net interest on assets (% ) 

5 Pre-tax earnings 

10 Number of employees 


The Marketing Director 

102-108 Clerkenwefl Road, London ECIM 5SA Telex: 23700 FINBI G 
Tel: 01-251 9321 

Even the most intrepid explorers 
benefit from specialist advice. 



Today’s investor doesn't need to be told 
about the value of an international portfolio. 

The opportunities for both income and 
capital growth are greater, but hidden traps 
are waiting. This makes it essential to have the 

very best advice. 

The kind you can expect from Kleinwort 
Grieveson Investment Management. 

Our ability to manage investments 
internationally is beyond question. As part of 
the Kleinwort Benson Group, our access to the 
Group's offices in 19 countries and links with 
brokers worldwide are merely a starting point. 

At home we’re using the experience 

■we've built up over the last century to manage 
worldwide assets of over £8 billion. - 

So large or small, whatever your invest- 
ment needs, we can provide the right service. 

If you feel you could use some help 
negotiating the hidden crevasses of modem 
investment in the UK or overseas, call or 
write to Carol Taylor) Kleinwort Grieveson 
Investment Management, 10 Fenchurch Street, 
London EC3M 3 LB. Tel: 01-623 8000. 

Kleinwort Grieveson 
Investment Management 

Member of Th« Stock E*ch*ng,, 









Financial Times Thursday May 21 1987 


:*i. . 



— !i 

■ -V 

• *■«.' 

; J-. “ 

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Flow of funds 

the holiday 

u WE’RE ALL going on a pen- 
sion holiday, no more payments 
for a year or two ...” More than 
one board .of directors must 
have been tempted to hum a few 
bars of Cliff Richard over the: 
past year, as cuts or holidays in' 
pension contributions have 
given a handy boost to. pre-tax 
profits. ~ 

1 There . Is little mystery about 
Che cause. For almost a decade, 
fund managers have outper- 
formed the assumptions of 
actuaries who have traditional- 
ly expected returns of around 1 
p^T cent over wage inflation and 
3 -per cent over price inflation. 

Figures from the Combined 
Actuarial Performance Survey 
(Caps) show that cash flows have 
declined sharply over the last 
three years. 

In 1884. median cash inflows 
were 3 per .cent of the value of 
fofads, or 2.4 per' cent on . a 
weighted average basis. By the 
following year, those propor- 
tions had declined to L7 per 
qent and 1 .5 per cent respective- 
ly. But last year the median cash 
inflow was only 0.1 per cent, and 
on a weighted average basis 
there was actually an outflow of 
0.8 per cent 

Translated into money terms, 
the Caps figures sbow that the 
average fond received a cash 
inflow of £2m in 1984, of £1.5m in 
1985, and incurred an outflow of 
£0-9m in 1988. 

Not all commentators agree 
with these figures— Phillips & 
Drew calculate that new cash 

flow, as a proportion of total 
pension fund assets, was 6 per 
cent in 1986, although well down 
on 22 per cent in 1975— but all 
seem -to agree on the direction 
of the trend. 

One reason why the shift is 
expected to continue is the 
effect of the 1988 Budget, which 
required foods to choose one of 
three routes to reduce sur- 
pluses — increase benefits, re- 
duce contributions or 'give re- 
funds to employers — if the fond 
was judged to be overfunded by 
more , than 5 per cent of its 
actuarial value. 

Since many schemes were 
already offering close to the le- 
gal maxim um benefits, cutting 
back on contributions will con- 
tinue to be the preferred route. 
In the short term, that will pre- 
sent little problem since, -after 
years of better than expected, 
returns on assets, fond mana- 
gers will be able to meet thej 
cost of existing benefits froml 
their investment income. 

But the impressive invest- 
ment performance of funds 
hides some underlying factors 
which have been making an im- 
pact on their cash position. 

The recession, and the conse- 
quent slimming down of work- 
forces in the early 1980s, led to a 
host of early retirements. For 
the pension funds, that meant a 
reduction in .their long-term 
liabilities; but in the short term, 
it meant lump-sum cash pay- 
ments to those leaving their jobs 
early and a reduction in the 

number of pension contribu- 

Another underlying; factor 
affecting cashflows is the better 
treatment now afforded early 
leavers. Previously, the raw 
deal received by mobile work- 
ers subsidised those who stayed 
with companies for most of their 

careers— hardly a formula de- 
signed to produce a thriving 
economy.. But now, for reasons 

The decline in cash * 
flows has prevented 
. ftmd managers using 
new money to alter the 
balance of their 

of equity as much as to ensure a 
more flexible workforce, early 
leavers receive much more 
generous transfer values. 

There is little fear, despite 
these factors, that the pension 
holidays could be overdone. 
The strength of the equity mar- 
kets easily outweighs the other 
changes. According to Richard 
Chapman, of Bacon & Woodrow; 
"All thing s being equal, the 
current spate of holiday- taking 
could last for up to five years.” 

But what if, as some analysts 
fear, there is a bear market? 
Surveys show that pension 
fluids have undergone a massive 
re-allocation of assets since Mrs 
Thatcher came to power in 1979. 

Funds have been shifted out of 
traditional sale havens; like fix- 
ed interest bonds and property, 
and into more risky, but recent- 
ly more profitable, equity mar- 
kets both in the UK and over- 

It would probably take a mas- 
sive decline in' equity markets 
to' cause fords any problems. 
“ The likely result of a collapse 
in the stock market would be an 
acceleration in the trend to- 
wards -starting pension fond 
contributions again,” believes 
Mr Chapman. 

However, one effect of the de- 
cline in cash flows has been the 
inability of .fond managers to 
use new money to alter the ba- 
lance of their portfolios. They 
have been forced to take more 
“active” " decisions— selling 
parts of their existing holdings 
to change . the weighting of their 

Two longer term factors affect 
the prospects for pension fond 
cash flows. The first is the 
growth of personal portable 
pensions, which will enable em- 
ployees to opt out of company 
pension schemes. 

Such pensions are particu- 
larly expected to attract youn- 
ger employees, leaving the pen- 
sion fond with a rapidly ageing 
and thus rapidly benefit-receiv- 
ing pension base. Although 
some managers believe that the 
decline could be offset by the 
inclusion of the many millions 

of workers previously un pen- 
sioned, some view the impact of 
portable pensions with trepida- 

The other factor is demog- 
raphic. Government statistics 
indicate that the number of 
pensioners is likely to increase 
from 9.9m, in 1984, to 12.5m in 
2025, while the size of the work- 
force remains static. 

Given the increasing trend to- 
wards higher benefits and in- 
dex-linked pensions, there will 
inevitably be a significant im- 
pact on pension fond cashflows 
somewhere in the next century. 

Bow serious this greying 
problem might be Is difficult to 
assess. If the economy and stock 
market booms, then investment 
income will, as in the last few 
years, probably be more than 
enough to cope with the in- 
creased benefits that will result 
from wage and salary growth. 

But a sustained slump, timed 
at exactly the wrong moment, 
might trigger demands from 
fund managers for increased 
contributions from employers 
and employees at exactly the 
time when both are feeling the 
pinch. If that happens, then the 
1980s era of pension holidays 
will be seen as a halcyon age, 
and the strains of Cliff Richard 
-will be replaced by “ Buddy, can 
you spare me a dime?” 

Philip Coggan 

Phillips & Drew Fund Management 

Professional investment management 
service for pension funds. 


£9.0 billions of pension funds 
under management. 

For further information, contact 
Keith Percy at the address below, 
or telephone him on 01-628 6070 
Phillips & Drew Fund 
Management Limited, 

Now incorporated and located at 
Triton Court, 14 Finsbury Square, 
London EC2A 1BR. 

■- LT. 

< rj:- 


October deadline 
looks possible 

PENSION FUND managers and 
trustees face a summer of por- 
ing over complex rule-books, 
talking to advisers and filling In 
application forms as they get to 
grips with the. new system of 
regulation of financial services. - 

Following the : passage last 
year of the financial Services 
Act, anybody carrying on invest- . 
meat business must apply / 
authorised— normally by. an - 
approved self-regulatory body— \ 
before a deaCBine'tdubbeti ‘F»- •' 
flay) which has not yet been 
fixed, bill could be- ax early is , 
October 1. * •' '*• 

The application of the new 
regulatory system to pension 
schemes has always been some- 
what controversial The original 
stance of the National Associa- 
tion of Pehsion Funds was that 
schemes were users of services 
rather than providers of them, 
ahd therefore should stand out- 
side the new framework. . 
'That stance has been mod- 
ified, but even now there is a 
degree of doubt over the precise 
conditions in which pension 
schemes could foil on one side 
or another of the regulatory bor- 

It is quite clear, however, that 
external investment advisers 
such as merchant banks or inde- 
. pendent managers will need an-, 
thorisation. - 

Normally they will belong to. 
the Investment Management 
Regulatory Organisation (Imro), 
an entirely new body which is 
establishing itself in offices in 

Ute Centre Point office tower, 

next to Tottenham Court Road 
tube station. . . 

Imro is itself In the process of 
applying for recognlton as self- 
regulatory organisation (SRO) 

by the top regulatory body, the 

Securities and Investments 
Board (SID). But provisional 
membership applications are 
already being processed. 

• It is clear, too, that in-house ■ 
investment practitioners need 
to be regulated. The most 
practical way is likely to be to 
set up the investment execu- 
tives in a separate management 
company (if the management 
Operation is not constituted in 
this way already). The managers 
ban then seek corporate 
membership of Imro. 

; The trustees, however, pre- 
sent different problems. Ori- 
ginally, when drawing up the 
new legislation, the Department 
or Trade and Industry was in- 
clined to bring all trustees with- 
in the " fit and proper " criteria 
which will be applied through- 
put the financial services in- 
dustry. . . . . „ 

It was pointed out by the 
NAPF that this could pose 
embarrassing problems where 
trustees had been appointed or 
elected by unions or work- 
forces. What would happen if a 
duly elected trustee was 
deemed not to be fit and proper 
by some regu latory body? 

So it was agreed that a line 
should be drawn between trus- 
tees and investment managers. 
But this has required the devis- 
ing of rules for 
caused cannot do if they area 
avoid what, from early in 1988, 
will be the criminal offence of 
carrying 011 investment business 

without authorisation. 

Basically, the formula is tbata 
trustee will not need authorisa- 
tion for his basic responsibili- 
ties of selecting managers, set- 
ting strategy and so forth. He 
wifi even be able to take iso- 
lated decisions, such as whether 
to accept takeover bids, or 
whether to change investments 
on political or ethical grounds. 

But what a trustee will be bar- 
red from is playing any role in 
the day-to-day management ot 

investment operations of bis 
pension fond. He will not be 

able -to instruct the manager 
•with any frequency. 

How this formula will work 
out remains to be seen. Accor- 
ding to J ohn Morgan, Imro chief 
executive, and himself a trustee 
. of the British Rail .pension 
scheme: "Trustees are puzzled 
and possibly a bit cross that 
they are being forced to debate 
a fine philosophical point’’ 

Certainly there is a school of 
thought in the pensions industry 
tint the new "rules will , consti- 
tute an unwarranted interfer- 
ence ifa the powervof trustees. - 

Btf lodg hs this trustees stick . 
carefiilly to the guidelines SIB 
and Imro axe committed not to 
prosecute. However, 1 there is 
bound to be a grey area in the 
degree of frequency with which 
interference by trustees will be 
permitted. Eventually there 
may have to be test cases,' if 
trustees decide to challenge the 

But despite the complica- 
tions. Mr John McLae hl a n , 

. board member of Imro and in- 
vestment manager of the Reed 
International pension fond, 
says the new framework could 
bring benefits. 

“In a positive sense, it will 
clarify relations between trus- 
tees and sponsoring companies, 
which in a majority of hinds 
have been mixed up with each 
other,” he argues. 

He suggests that. In quite a 
number of smaller companies, a 
casual situation has developed 
iu which company officials in- 
formally make investment deci- 
sions. This will have to stop. 

Mr McLaehlan, who is also 
chairman of the investment 
committee of the NAPF, accepts 

that the new regulatory set-up 

will prove expensive. “ But it is 
not a negative thing, it is quite a 
positive approach,” he insists. 

Although trustees in general 
will not need authorisation, 
there could be a layer of pen- 
sion fund supervision which 
will need to be covered. 

Some funds are run through 
executive sub-committees 
operating on behalf of the trus- 
tees. Including executives and 

■ sometimes outside co nsultant s. 
These people might need au- 
thorisation, perhaps as indi- 
viduals, where they are close to 
the day-to-day dealings oF the 

^imrn is offering a special low 
annual subscription rate for 
such Individuals of £500 Cplus 
VAT), on the basis that their 
annual gross revenue from. in- 
vestment business of the kind 
regulated by Imro is less than 

John McLaehlan gives as an 
example the Reed International 
investment committee, which 
consists of two trustees, two ex- 
ecutives and two outsiders. 
They ere likely to need au- 

This could be sought indi- 
vidually, or the committee could 
be collected together as a little 
company which would seek 
corporate membership of Imro. 

Corporate membership for in- 
house investment managers 
would certainly be preferred, 
because, although individual 
authorisation might also be 
possible, it would cany serious 
risks. If key managers were to 
fall ill or otherwise be put out of 

■ action, the fond might be tem- 
porarily left with nobody prop- 
erly authorised to manage it. 
pending the completion of a 
possibly lengthy new member- 
ship application procedure for 
an alternative manager. 

These are complex matters to 
consider, and the fear among 
the regulators is that many pen- 
sion fonds will be too slow in 
fociog up to all the implications 
of the new regulatory system. 

Barry Mtajr 

kind of treatment 
your pension fund 


At first sight, your 
pension fund’s performance 
may appear quite respectable. 

But Fidelity suggests a look beyond the 
portfolio can be even more revealing. 

For example, what in reality is the 
personal attention you get from your pension fund 

Those rare personal appearances, that 
none-too-inspiring report and ‘hard to reach’ 
’phone calls. 

What you don’t know is that many 
managers are trying to run up to eighteen other 
pension funds at the same time. 

At Fidelity, our rule is that a manager 
handles no more on average than eight funds. Each 
manager is a highly experienced senior executive 

and a share- 
holder in the com- 
pany. More motivated 
we think than graduates learn- 
ing their way through your books. 
Nor is your pension fund surrounded by 
Chinese Walls. 

■ Fiddity is fully independent, unburdened 
by the corporate investment pressures of ‘Big Bang* 

So, while your present performance may 
pass as ‘respectable*, remember Fidelity can offer 
you a record of consistent top quartile performance . 

Results that are matched by the resources 
of one of the world’s biggest and most successful 
investment groups with over £45 bn under 

Next time you’re about to review your 
pension fund arrangements, shouldn’t you talk to 

Fidelity first? 

For a more dedicated and senior service. 

In the meantime, you can contact 
Neil Curtis or Philip Nash for further information. 

We will also forward you a copy of our 
Pension Fund video or, 
brochure on request. 

2SLovat Lane, London EC3R 8LL Telephone 01-283 9911. Telex: 884587. 





Financial Times Thursday May 21 19 87 




The facts speak for themselves; according to 
the largest survey ' of pension funds in the country, 
Newton Investment Management has managed 
the best-performing pension fund over the last 
nine years. 

Including an extraordinary record of being 
in the top 5% in each of the last four consecu- 
tive years. 

As for our more recent clients — in 1986, all 
our segregated portfolios produced returns of 
well over 30%. 

The facts speak volumes for the skills and 
experience of our fund managers. 

For our philosophy of identifying and buying 
value. And for our operating structure, which 
makes research covering both UK and overseas 
markets available to every size of fund. 

If you're reviewing your company's pension 
fund management, an independent firm with an 
exceptional performance record across a range 
of funds may well have something to offer you. 

To discover more, contact: Richard Horlick. 
Newton Investment Management Ltd, 145—9 
Borough High Street, London SE1 l NIL Direct 
line: 01-463 5842. Telex: 291 93L 

NmMfli Imnumii wk liinnrd m IVWi. 

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ronlrul uf ifap rompoov atbiffa rumfHh m . n . p p am LlMta. 



■TV V M Coni|Hm iauti) ill IVomoi* Fund, W7H- lUBb 
iwrim; imtWN, of! k pnwM iaan^ 'IV fund ■ wurmnl » 
■nnfium mot) Eninvn SlSm— SHHlm. 



Smaller portions 
should look 
more appetising 

DEVELOPERS, chartered sur- 
veyors and banks go about their 
business with one question run- 
ning continually in the back of 
their minds. When will the pen- 
sion Rinds be back in the prop- 
erty market? 

In a way the question is mis- 
placed, because the Rinds have 
□ever been out of it Bui what 
they have done is sharply to 
downgrade the level of their in- 
vestment and thus play a signifi- 
cant role in the changing pat- 
tern of development finance. 

Institutional investment in 
property has slackened con- 
siderably since 1382 and the 
banks have stepped into the 
breach, providing a greater 
volume of short-term funding. 
They have a motive for asking 
the question because they need 
to know how they can get their 
money out They need to know 
who will be refinancing their 

Developers, for their part, 
know that only the blue chip 
property investments are likely 
to attract institutional support 
under present conditions. While 
it is true there is no shortage of 
finance from other sources, they 
would welcome the extra varie- 
ty of sourcing which would come 
from a revival of pension Rind 

Chartered surveyors for some 
time have been urging the 
necessity of property invest- 
ments to achieve portfolio ba- 
lance for pension funds and of 
course, have a vested interest in 
increasing turnover in the in- 

The problem has been that 
equity investment has provided 
the Rinds with high short term 
gains and for managers under a 
constant measurement of 
performance the Stock Ex- 
change has looked a much bet- 
ter place to be 
The other problem for the 
funds has been that, while prop- 
erty has traditionally been a se- 
cure investment, it is also a very 
lumpy one Big projects demand 
heavy spending and they can be 
difficult to selL 
So, much stress now is being 
laid on drawing the Rinds back 
into the market with the in- 
troduction of new investment 
vehicles, which will allow prop- 
erty to be swallowed in smaller 
bites. And, if the portions are 
smaller then the market should 
be more liquid and. as the spon- 
sors of the new vehicles hope, 
more attractive to the funds. 

These vehicles come under 
the heading of unitisation and 
securitisation. The essence of 
the scheme is to take a building 
and either make it the sole asset 
of a company which can issue 
shares and float debt securities 
or to split it into units which can 
be sold as property income 
certificates or as shares in a 
trust owning the building 
The Stock Exchange has been 
drawing up the listing require- 
ments. which should soon be 
annouuced, and then it is hoped 
that buildings will be brought to 
the market “Unitisation will 
transform the market For large 
property investments, where 
there are currently few buyers,” 
according to Weatherall Green 
and Smith, the chartered sur- 
veyors, “ but the market's con- 
tinuing success may depend 
upon the total value of the units 
exceeding the existing open 
market value of the property." 

But this transformation is 
likely to come only gradually 
and it is not by any means cer- 
tain how many funds will rush 
into the new market Certainly 
the sponsors are hoping that 
those who have disappeared 
will be lured back and that 
small Rinds, driven away by the 

size of investment necessary 
will re-think their purchasing 

Debenhaxn Tew son and Chin- 
nock, chartered surveyors, who 
monitor pension fund property 
movements, have stressed the 
importance, of the smaller 
funds. In a recent study the firm 
noted that “ It is the small and 
medium size Rinds that have re- 
corded the sharpest reduction 
in their commitment to prop- 

“The overall rating given to 
property in the early 1980s (that 
is. the share of their investment 
portfolio! was 12-15 per cent, but 
by 1985 this had fellen by 50 per 
cent to just 8 per cent For the 
largest pension Rinds (£lbn or 
more assets) the downturn has 
been only 10 per cent, while for 
Rinds of £500-£lbn the reduction 
was 22 per cent," Debenhams 

Pension Rind investment in 
property bas tended, in any 
case, to run at a lower level than 
that of the insurance com- 
panies. But while insurance 
company net investment has 
edged up since 1984. the yearly 
totals for the pension funds 
have gone down since 1981 
when new money invested came 
to £843 m. 

Department of Trade and In- 
dustry figures show new invest- 
ment slipping to £797m in 1982, 
down to £306m in 1986. At the 
end of last year, however, 
quarterly investment figures 
were the highest for any three 
months since 1985, at £182m. 
'Whether this is a freak figure, or 
whether it is a response to the 
shortage of office space (not 
only in the City of London but in 
many provincial centres); to the 
retail trading boom; or to the 
high yields available on many 
industrial properties, is not yet 

Generally, the funds are cau- 
tious investors. The greater part 
of their spending is likely to be 
in the south east of the country 
and their interest in offices 
tends to concentrate on central 
London and the major provin- 
cial centres. 

But their interest in office 
property has declined this de- 
cade as they have expanded 
their retail interests. The In- 
vestment Property Databank, on 
the basis of surveys of institutio- 
nal investment, has drawn up a 
profile of a typical portfolio 
containing 49.9 per cent offices, 
35.3 per cent retail property and 
14£ per cent industrial proper- 
ty. But the sources of rental in 
come are slightly different— 50.8 
per cent offices. 28 per cent re- 
tail and 21.2 per cent industrial. 

The next moves are obscure 
because so much depends on 
whether the upward trend of the 
equity market continues. 
Fletcher King, chartered sur- 
veyors, has predicted con- 
tinuing demand for central Lon- 
don offices and for space at 
selected locations on the M25 
ring around London. Despite re- 
gional variations, the industrial 
market is strengthening and 
business paries are beginning to 
draw in institutional invest- 
ment The retail sector is also 
strong and the search is on for 
market town properties where 
the prospects for rental growth 
are most extensive 
Whatever happens the pen- 
sion Rinds will remain, despite 
their apparent indifference to 
the property market, vital for 
the industry. As the Investment 
Property Databank noted, the 10 
largest insurance companies 
and the 10 largest pension Rinds 
between them have property In- 
vestments pushing up towards 
£20bn in value. 

Paul Cheeseright 

are pleased to announce 
the following median returns 
which include 
all Pension Funds 
under their management 

5 years 
10 years 
12 years 

+25.1% p.a. 
+20.7% p.a. 
+23.6% p.a. 

PS. We leave advertising the short term 
to those who cannot manage the long term 

Licensed Dealers in Securities 

2 Friars Lane, Richmond, 
Surrey TW9 1NL 
Tel: 01-948 0164 

Personal pensions 

Company schemes may be hit 

THE 1986 Social Security Act, if 
and when it comes into opera- 
tion next year, will represent a 
watershed in UK pension provi- 

Its revolutionary proposals 
are likely to make a dramatic 
impact on private pension pro- 
vision, and on the underlying 
fund management But as yet no 
one knows which way the provi- 
sions will operate in practice 

At present employees are 
either in the State Earnings- Re- 
lated Pension Scheme (Serps). 
or they are in a final-salary pen- 
sion scheme operated by their 
employer which is contracted- 
out of Serps. 

The decision as to whether 
the employee is contracted-out 
rests with the employer. And for 
the vast majority of company 
pension schemes, membership 
is compulsory for employees as 
a condition of employment 

All this will change if and 
when the Act comes into opera- 
tion, Employees will no longer 
be required compulsory to Join 
their employer's company pen- 
sion scheme. Membership, as 
Rom April 1988. will be 

Moreover employees will be 
able to opt out of their company 
scheme and Serps and make 
their own pension provision 
through a personal pension. 

The other major change in the 
pensions scene brought about 
by the Act is that employers will 
be able to set up company pen- 
sion schemes on a money-purch- 
ase basis, which can be con- 
tracted out of Serps- 

There are three major effects 
that the Act could bring about 
First, those employees not in a 
company pension scheme could 
take a personal pension instead 
of being in Serps. To encourage 
employees to do this, the Gov- 
ernment is paying, until April 
1993, a 2 per cent extra incen- 
tive contribution from the 
National Insurance Fund. 

Second, those employers cur- 
rently without a company pen- 
sion scheme could set up their 
own money-purchase scheme. 

If these two things happen, 
then private pension provision 
will be expanded without great- 
ly upsetting the present final 
salary-based company schemes 
and the investment managers 
and investment houses that 
manage the Rinds. 

Certainly, Mr Norman Fowler, 
the Social Services Secretary, 
author of the Act and the whole 
pensions reform, is predicting 
such an event as the likely 
course of events. 

But there is another scenario . 

. . that employees who are cur- 

fftr Norman Fowler: expansion 

rently members of company fi- 
nal salary pension schemes, 
particularly the younger em- 
ployees. will vote with their feet 
and come out of their company 

These employees would be 
likely to take a personal pen- 
sion. though if they have been in 
their employer's scheme for at 
least two years they will not be 
eligible for the incentive con- 
tribution. But if they have been 
persuaded to come out by a 
smooth-talking life salesman, 
then he will also have per- 
suaded them to take a personal 

It Is, however, by no means 
clear that the employee has to 
take a personal pension if he 
comes out of his employer’s 
scheme. He may come out, be- 
cause he or she resents compul- 
sion, simply to get a higher take- 
home pay Rom lower pension 

If this does happen— and the 
Government Actuary is guessing 
that 500,000 employees under 
the age of 45 will do just that— 
then there will be an impact on 
company schemes. 

This would be slow at first, 
but ultimately it would lead to a 
stowing down in the growth of 
the pension fond assets, and 
eventually to a net disinvest- 
ment Those finance houses that 
are heavily into pension Rind 
management would be severely 
affected, with little in the way of 
offsetting the loss. 

Personal pensions can only be 
issued by life companies, unit 
trusts, banks and building 

societies. Most of the major life 
companies manage their own in- 
vestments and are expecting a 
boom In pension sales Rom the 

Some merchant banks and 
other finance houses do have 
life company and unit trust sub- 
sidiaries. However, the prob- 
able growth in personal pen- 
sions business Is very unlikely 
to offset the run-down in assets 
managed for final-salary com- 
pany schemes. These financial 
institutions will have to seek 
other forms of pensions man- 

To start with, many smaller 
life companies employ outside 
investment managers. Others 
could follow this lead, if the 
financial institutions can show 
that it has the expertise to do 
the job cheaper and with better 

Pensions schemes operating 
on a money-purchase unitised 
basis are going to have their 
investment performance con- 
tinually monitored; just as unit 
trusts are currently monitored 
every month. 

Several building societies 
have indicated that they are 
keen to become major players 
in the personal pensions Geld. 
If they stick to deposit-style con- 
tracts. then there is nothing in it 
for the investment houses. 

However, several societies 
have said that they want to offer 
equity-based contracts as well 
as deposit-based contracts. 
Many will be looking for invest- 
ment managers to handle their " 
equity investments, at least for 

the first few years. 

The prospects do not i«ok 
much "better for company 
money-purchase schemes. 

There is nothing to > stop > 

employer running his 
money-purchase schem*— 

most employers currently with- 
out a scheme are small 
employers. They are unlikely < la 
wont the hassle of running thi . ir 
own scheme, especially to*- 
administration involved. Tm > 
ore more likely to use anoiT-lh.- 
peg scheme from a life 
pany. especially as most of tm. 
administration is also handled 
by the life company as part oi 
the package. . . 

The life assurance indusLry n- 
a whole should gam from the 
new scenario. But within th*? 
industry there will be winners 
and losers among the com- 
panies. ... 

Those life companies with 
little pension business at pre- 
sent could well expand their 
involvement and be looking i*> 
strengthening their investment 
backing. However, the estab- 
lished life companies with con- 
siderable company pensions 
business, such as Legal & Gene- 
ral, Prudential Assurance and 
Standard Life could see their 
overall pension business 
switch, with a drop in company 
final-salary schemes offset by a 
rise in personal pensions and 
small money-purchase company 

However, these life com- 
panies have their own in-house 
investment teams and should, 
cope with the change in invest- 
ment brought about by the 
switch between types of pen- 
sions business. 

In general, personal pensions 
business is more profitbale to 
life companies than company 
pensions business, because 
charges on the latter have been 
kept low through competitive 

The Government, despite hav- 
ing the powers in the Social 
Security Act. is not imposing 
any controls on the charges and 
expenses that life companies 
and others may impose in their 
cost structure for personal pen- 
sions. Nor is there any control 
or limitation on the underlying 

It needs to be emphasised that 
this is a completely new situa- 
tion. Financial institutions 
need to be flexible in their plan- 
ning, and be ready to switch 
strategies as the pensions scene 
clarifies afier April 1988, 
assuming there is not a change 
in Government 

- Eric Short 




As usual, Murray Johnstone are 
repeating themselves. 

A look at our five year record 
will tell you why 

Our average Pension Rind 
Performance stands out at an 
impressive 31.3% p.a - com- 
fortably ahead of the industry 
average of 24.1962* 

Such consistent performance 
in the world markets reflects 
Murray Johnstone’s unique 
investment qualities. Namely, 
complete independence, 
specialist investment manage- 
ment and an experienced and 
established team. 

Meanwhile, our tried and 

Source*: Figure refers to Murra y Johnstone's annualised average fund 
performance compared to the industry average over 5 years to 31/12/86. 

Licensed deafer in securities. 

tested investment process 
of continuous stock screening 
clarifies fund management 
decisions, making the most of 
the £1,700 million pension 
funds we manage. 

Murray Johnstonete impec- 
cable performance record, 
coupled with our 80 year 
history of investment could 
be of benefit to your clients 

Don’t be average. 

Contact Nicholas Prescott 
or Elizabeth Kease at 
Murray Johnstone Limited 
163 Hope Street, 

Glasgow G2 2UH. 

Telephone 041-221 9252. 




Financial Times Thursday May 21 1987 


Index funds 

Passive tracker gain ground 

ONLY THREE years ago, index- 
matching funds and the 
quantitative . .analysis of share 
price movements on which they 
are based, were scorned by 
nearly aU pension fund trustees 
and most managers as an 
esoteric transatlantic product 

of UtUe relevance to the UK. 

Since then, the value of those 
PS funds which are passively 
managed to trade the returns on 
some form of stock market index 
has risen to more than £10bn. or 
about 2.5 per cent of the value of 
UK equities. That proportion is 
already large enough to affect 
the market, particularly .in pri- 
vatisation issues when there is a 
scramble to build up a fall 
weighting in the stock. 

It is, however, fax below the 10 
per cent figure far the US stock 
market ana has yet to make any 
major impact on the fee struc- 
tures of investment managers or 
on the methods of trading 
equities. Although most UK 
trustees have discussed indexa- 
tion as a response to poor, 
investment performance, few 
■have so far taken the plunge. 
The marketing costs for the 
pioneers of indexation in the 
UK are proving high. 

The growth of passive man- 
agement can be-seen as a reac- 
tion against the supposedly 
short-term trading approach to 
investment management of 
many British funds. That 
approach has given rise to two 
types of criticism. 

One is that, in each of the last 
four years to December 1988, 
about 60 per cent of UK pension 
Rinds have managed UK equity 
portfolios which have achieved 
lower returns than the FT-A All 
Share index, the broadest mea- 
sure of performance of the UK 
stock market In overseas mar- 
kets, particularly the US and 
Japan, their performance since 
1983 has been even more 

More specifically, data col- 
lected by the US-based pension 
fund consultants Frank Russell 
suggests that, if UK fond mana- 
gers have been able to add any 
value far their clients over the . 
last five years, if has been, in 
their asset allocation dMishms 
between different stock mar- 
kets, currencies and equities or 

bonds. ■ ■ . 

The condtulon. Ia> tint pen- 
sion fond trustees should, re- 
move the risk :of sueb uoder- 
performance, and save some of 
their management 'fees, . stock- 
brokers* commissions and other 
dealing charges by setting up a - 
passive fand-|qjn^^dliffaronl„ 
stock market indices. 

• The other criticism, made by 
the Bank of England executive 
director, Mr David Walker, is 
that fond managers should more 
actively monitor and influence 
the performance of the con^ 
ponies they invest in, and not. 
rely exclusively, on the possibil- 
ity of a takeover bid to replace 

' .» if" _ 

f # 


British Tele c om active Dues, 

Why consider indexation ? 

20 Number of funds 

Active fund managers’ 
returns on UK stock 

market relative to 

J.5. FT-Aetnerfee ; 

AM -share _ 

index ! \ 

Index retun 
laMoH anw c liw coml 

return -5 years 

15 * 20 * 

Sows -Actuarial peri omanca ireoau-ement services 

poor management. On this view, 
passive management represents 
.the most extreme form of the 
hands-off attitude of UK pro- 
fessional investors. 

The largest passive fond in 
the UK is that managed by Post- 
el for the British Telecom and 
Post Office pension fluids, 
although Postel does not apply 
the more rigorous index-track- 
ing methods of other fluids. 
Other company pension -.plans 
with., imhouse passive manage- - 
rpent include. Esso and Jtfaxs. : 

Index-matchezk in the UK are 
the external,- specialist invest- 
ment management houses. The 
largest manager is BZW Invest- 
ment Management, the subsidi- 
ary of Barclays bank ijAicK iru 
one of the first to develop and 
market , a product three years 
ago. BZW now has £2£bn under 
management in passive fluids. 

of which about half are the 
assets of the giant Barclays pen- 
sion ftrnd. 

- The second largest manager is 
County Investment Manage- 
ment the National Westminster 
' subsidiary, which has generally 
been the more innovative in de- 
veloping and marketing 
quantitative investment techni- 
ques for the UK market 

Both BZW and County use an 
optimisation . . technique. .. de- 
veloped vby-tbe Californian con- 
sultancy . firm, Barra, - wh£ch 
allows themao-selectnaample- 
of the stocks that make up the 
index, whose share price 
performance will match that of 
the index to within one percen- 
tage point in most years. 

In fact, the managers invest in 
nearly all the largest 100 or so 
stocks, which account for more 
than 70 per cent of the market 
capitalisation of the All Share 

Index, and apply the sampling 
method to select approximately 
-another 150 of the smaller com 1 
p anies. Investing small amounts 
of cash flow in all of the thinly 
traded stocks in which the mar- 
ket-makers quote wide spreads 
is generally considered too ex- 
pensive, although the 
stockbroking firm Quitter 
Goodison, has run a fund for 
several years which fully repli- 
cates the index. 

The sample is based on com- 
paring the risk exposure of 
different companies calculated 
from their key financial and 
accounting- ratios (price-ear- 
nings ratios, yields, currency ex- 
posures) which have proved re- 
liable indicators in the past As 
many as 40 different factors may 
be used to select the best sam- 
ple. For the more complex 
Japanese market, Barra and 
Nikko Securities have de- 
veloped a model which uses 64 
different factors. 

County also offers index- 
matching fluids based on the 
use of financial futures, in par- 
ticular stock index futures on, 
for example, the FT-SE 100 in- 
dex in the UK or the Standard 
and Poors 500 index in the US. 
The tracking is less accurate, 
-but the transactions costs can 
,be considerably lower, particu- 
larly. for. smaller .fluids -and 
those investing in overseas mar- 
kets which have stock index fu- 
tures, such as the US, Japan, 
Hong Kong and Australia. 

'BZW offers an international 
index fluid based on a sampling 
technique that allows even 
small pension plans to track a 
world index by investing in only 
nix markets. Although the track- 
ing error (above or below) is 
three to four percentage points 

per year, the under-perform- 
ance of most UK pension funds 
in world markets has been grea- 
ter than this. 

The alternative method of 
running a passive index-match- 
ing fluid on the basis of sam- 
pling was adopted last year by 
the insurance company, Legal 
and General, which had been 
suffering a loss of pension 
clients following a period of 
mediocre performance. Its 
method, called stratified sam- 
pling, is based on a system 
developed by another US con- 
sultancy firm, Wilshire Asso- 
cites. All the largest 100 or so 
stocks are selected, plus 
another 100 to 200 smaller 
stocks (depending on the size of 
the fandX The main criterion in 
selecting these stocks is to 
ensure that the fund has 
invested in the correct spread of 
industrial sectors, which accur- 
ately reflects their weighting in 
the index. 

The lack of performance 
statistics make it difficult to 
judge the most appropriate 
method of indexation, fall re- 
plication, optimisation or strati- 
fied sampling. It probably de- 
pends on the size of the fund 
and its attitudes to risk. Chase 
Manhattan bank is now market- 
ing all three methods in the UK 
based on its experience in the 
US. .. 

Clive Wofanan 

Because the world 

beyond the dikes. 

The proverbial international 
orientation of the Dutch is reflected in 
Pierson Capital Management’s 
approach to investment management. 

Represented in the world’s 
main investment areas, each client 
benefits from the local expertise of all 
Pierson Capital Management units. 


Amsterdam, Hong Kong, Wilmington (USA). 
Curasao, Guernsey. 

Fbr further information phase contact B ram den Engelsea 
Telephone 020- 21 11 88. Herengracht 237. 1016 BH Amsterdam. The Netherlands. 



At Number One Charlotte Square we chose to 
remain independent of the City revolution. So the Big 
Bang was something of a non-event 

Investment management is still, as it has been 
for 90 vears, our only business, a single-minded 
specialisation incrcasingJyTare in today's world of the 
financial conglomerate. 

So our pension dents, major companies and 
local authorities alike, can be sure that their interests; 

Today they are reaping the rewards oflower 
transaction costs - negotiated free of charge by our 
dealing department; a comprehensive in-house 
research capability which is an essential protection in a 
changi ng environment; and international awareness — 
increasingly important as the UK stockmarket goes 

In an age of change, some things don't - such as 
the combination of high technology, tradition and 

currently. worth ovarii billion and covering more -^Jn^grity that is the hallmark of one of Britain's leading 

than30 fands»are still protected tyaprofesskraalism^Sfli^Vinvestinent management companies. For further 
that is completely objective. T ||MJ information please contact David NichoL 






When MIM Limited manages your 
pension fund, you can expect some 
impressive results. 

Look at our record. 

Wfe serve 100 pension funds, with more 
than £2 billion under management. 

WfeVe been in the Upper Quartile for five 
of the past seven years. 

And our annualised return is currently 
25.1% against the average fund’s 217%? 

Our success is founded on two factors. 
First, our commitment to our clients and 

their needs. That’s why we have an 
exceptionally high ratio of fund managers to 
funds invested 

The second is our commitment to total 
teamwork. We look for exceptional 
experience, skills and judgement. Then we 
use all our team resources to formulate both 
global policy and individual fund strategy. 

Could your pension fond benefit from 
this approach? Ask Malcolm Callaghan on 
01-626 3434. Or write to him at MIM Limited, 
11 Devonshire Square, London EC2M 4YR. 


INDEPENDENT pension management 

One chaw . om square uxrcaxuHE>C4or teuphomd3i-S2sds» 

*The WM Company 1982-6 weighted average. 



Financial Tiroes Thursday May 21 198? 


In the latest WM Performance Report 
prepared for John GovetL our own 
average performance was in the top 
decile of funds measured. Not just over 
a short period but the five years from 
1981 to 1985. 

instead of assessing sectors within 
markets and gradually narrowing 
our choice of investments, we focus 
on individual companies right from 
the start - on the quality of the 
management, the product earning 

power and the asset backing. 

If we like what we find we invest - 
usually in a very substantial way. 

This is a strategy that has proved 
itself in the short and long term, and 
we are confident that it will continue 
to work. 

If you would like further infor- 
mation about our methods of 
working and the services we 
offer, please telephone 
Robin Berrill on 01-5885620. 

♦ Independence offers its own rewards GOVE T T 

•';r. ‘i* . 

Over the past three years, 
we have orchestrated in excess 
of a 24 % per annum increase 
in our balanced pension fund 

. «t> 

-mb fBaBSta BOOWV*' 



J •• 

,*• ,y 


*-~ + 

*> r 

4 r- -' A 

avV* *'*■*.■ 


*i r i» 

> ;i-7 

In fluctuating and frequently 
erratic markets, the demands on 
today's fund managers are ever 
increasing, requiring proven ability 
and skills to orchestrate differ- 
ent elements such as currencies, 
share values and interest rates to 
produce a performance of out- 
standing quality. 

At Swiss Life, we have those 
skills and abilities. Our investment 
performance has been exceptional, 
producing results that truly reflect 
our expertise. Our experience 

* v 3 

covers fund management for , vV * 
segregated portfolios as well 
as pooled equity, international, 
fixed interest, index linked, and 
property funds. 

For further information, contact 
Harvey Kember at our office in 
Sevenoaks for the details on how 
your pension monies can best 
participate in this successful 
independent fund management. 

You can make sure you take 
advantage of our all round outstanding 


^ i : h vv ,y V? * X 

An outstanding all round performer 

Swiss Life Pensions Limited 
9-12 Cheapside. London EC2V GAL. 01-236 3841 
99-101 London Road, Sevenoaks, Kent TNI 3 1AX. (0732) 450161 

Zurich ■ Munich ■ Paris ■ Amsterdam ■ Brussels - London - Madrid ■ Luxembourg 





Guidelines for tiie tightrope 

THE 1886 Financial Services 
Act is revolutionising the opera- 
tions of all investment services, 
from the handling of major port- 
folios to the selling or life con- 

No one who is not authorised 
under the Act will be able to 

handle investments or give in- 
vestment advice when it comes 
into force — the expected date 

being the beginning of 198 a 

Trustees are involved in the 
Act in a number of ways, though 
their position is far from clear 

First, occupational pension 
schemes as such are not invest- 
ments as defined by the Act. Bat 
the underlying assets are de- 
fined as investments. 

Second, trustees are becom- 
ing more involved in advising 
members of pension schemes on 
such matters as: the investment 
of lump-sum payments from the 
flznd; investment of transfer 
payments, when employees 
change jobs; and, under the new 
f r am ework, personal pensions — 
compared with company 

The Act is extremely vague on 
the trustees’ role in giving 
advice to members, and so is the 
Securities and Investments 
Board (Sib), the body responsi- 
ble for operating the Act 

However, with regard to the 
investment of the assets, the Act 
itself and the Sib are much 
more specific on the authorisa- 
tion position. 

Under Trust Law, the trustees 
are technically responsible for 
the investments of the pension 
scheme; and technically should 
be authorised. However, the SIB 
has enough problems authoris- 
ing existing investment Craw, 
without getting involved with 



the trustees of 
sch em es th ere are literally 
thousands of company schemes: 

So its guidelines to trustees 
on their investment responsibi- 
lities ere clear-cut 

If the trustees are’ not in- 
volved in the day-to-day invest- 
ment decisions of the fends, 
then they do not require 'au- 

Very few trustees actually 
handle the Investment of the 
fends under their control. In- 
variably this is delegatedto in- 
vestment managers — either in- 
ternal or external — with varying 
degrees of discretion. 

The investment managers 
must be authorised in order to 
carry on their business, usually 
through the Investment Mana- 
gers Regulatory Organisation 
Gmro) the self-regulatory body 
operating under the SIB for this 
sector ofthe investment market 

The SIB baa -laid down guide- 
lines on what trustees can do in 
connection with their invest- 
ment responsibilities - without 
these being regarded as being 
day-to-day decisions. 

Regular decisions on asset 
allocation, in consultation with 
the investment managers and 
other advisers: It is usually for 
trustees to meet quarterly, or 
half-yearly, to review the alloca- 
tion of new money and the ex- 
isting portfolio in relation to the 
division between equities, fix- 
ed-interest and property. 

The laying down of overall 
guidelines to the investment 
managers and their periodic re- 
view-such as no investments in 
South Africa. 

Involvement in specific in- 
vestment decisions of a one-off 
nature, such as 
tween the investment managers 

and - trustees over particular 
takeover situations. 

: ' Selection of investment mana- 
gers, ABd a review of their in- 
vestment performance, either 
infernally or, as is more usual, 
using external firms specialis- 
ing ah pension fend perform- 
ance measurement 

This list of activities covers 
the general involvement of most 
trustees in investment matters. 
So it would Appear that they do 
not need authorisation to con- 
tinue with, this aspect of their 

Howe v er, as the SIB keeps 
warning, the ultimate decision 
oh whether or n ot to authorise Is 
not the SIB’S. The conditions for 
authorisation are laid down in 
the Act, and trustees should 
consult their legal advisers. 

Indeed, trustees have- been 
consulting their legal advisers 
oh a variety of matters in recent 

" There Is the famous McGarry 
decision, in the National Coal 
Board Judgment, that trustees 
must Invest solely for the be- 
nefit of their members and must 
not take into consideration 
personal feelings. And the judg- 
ment in the Courage pension 
fend-showed that trustees have 
to take care over the distribu- 
tion of pension scheme surplus. 

However, trustees' responsi- 
bilities have been brought into 
focus Strongly over their role 
when the parent company is in- 
volved in a takeover battle, 
usually as a defender. 

A company cannot acquire its 
own shares to protect itself 
against a predator, but there is 
nothing to stop its pension 
scheme acquiring shares In the 
parent company. 

It is generally held that self- 

investment by a Pension Kjh«^« 
in the parent company **■““!“ 
be strictly limited. The 

Sbjective of a fended company 

pension scheme, set up *fefler 


However, employees made re- 
dundant following the takeover 
of their company will not be 
reassured to be told thai thetr 
peoafon benefits to dale are 

^Bryant Holdings tweenrty 
fought off a bid from English 
China Clays, using the penriun 
scheme assets to buy its share®. 
aThis had the support of em- 
ployees. anxious to preserve 
their jobs, even though, as an 
investment decision on its own, 
it could be questioned. 

However, the opinion of lead- 
ing pension lawyers is that auen 
use of pension fend assets is 
fraught with danger. At the end 
of the day. trustees may have to 
prove in court that it was in the 
members’ interests, as pension 
beneficiaries, not as employees, 
that the parent company should 
not be taken over. 

There have been other inst- 
ances of the abuse of re- 
sponsibility for pension assets 
in takeover situations, and 
there are calls for legal controls 
on self-investment, say to a limit 
of 5 per cent of assets. 

Though pension scheme mem- 
bers are wary of legislation on 
investment controls, such a 
move, as part oT general legisla- 
tion on takeovers and mergers, 
would be welcome, if only to 
clarify the position. 

Eric Short 

Performance measurement 

A new task that needs a specialist 

EMPLOYERS and trustees of 
company pension schemes are 
.no longer prepared to allow 
their investment managers to 
look after their pension scheme 
assets without a check on their 
overall performance. 

The days when the employer 
passed over the pension .con- 
tributions every month to a mer- 
chant bank and then, forgot 
about it' are over. 

The employer, in a final sal- 
ary based pension scheme, is 
effectively underwriting the 
finances of the scheme and a 
shortfall in investment perform- 
ance by the managers means 
that he will have to increase his 
contributions in order to main- 
tain the solvency of the fend. 

By contrast, a top class invest- 
ment performance means that 
employers can reduce their con- 
tributions and use the money 
elsewhere in their business. 

Profits are currently being 
given a substantial boost 
through the contribution holi- 
days many companies have 
been able to introduce as a 
result of a very good investment 
performance by their pension 

There are, however, two basic 
problems in checking the 
performance of investment 
manag ers. 

• First it is a highly tech n ica l 
exercise and the measurements 
used must not have ony inbuilt 
factors that prevent an objec- 
tive assessment of the mana- 
gers’ investment ability. 

• Secondly, the exercise 
needs to be carried out inde- 
pendently of the investment 
managers themselves, though 
they need to be made aware of 
both the feet that their perform- 
ance is being reviewed and of 
the results. Indeed, their co- 
operation in providing the data 
is essential. 

These two features point to 
the need for the performance 
measurement to be carried out 
by a separate internal depart- 
ment under the trustees’ con- 
trol, or. as is more usual, by an 
external firm specialising in 
performance measurement. 

There are a few such firms 
operating in the UK, which have 
built up a high reputation for 
efficiency and impartiality, 
such as the Edinburgh based 
WM Company or the Combined 
Actuarial Performance Services 
run by the leading consultant 
actuarial firms. 

The development of perform- 
ance measurement is compara- 
tively new and techniques are 
still to be refined. 

The money weighted rate of 
return is a straightforward 
calculation showing the actual 
return on the fend. This demon- 
strates whether the first objec- 
tive of investment— to match 
prices and salary inflation — has 
been achieved. 

Indeed, it is possible to calcu- 
late a rate of Investment return, 
adjusted for earnings or price 
inflation, that will give trustees 
and their actuarial advisers a 
more precise measurement on 
how the fund is dealing with its 
inflation objective. 

However, this measure is not 
really suitable for comparing 
the performance of investment 
managers or different sectors, 
since it is influenced by the 
time during the period when 
new money became aval able for 

The alternative is time- 
weighted rate of return. 

This is a series of money 
weighted returns over short 
periods linked together to 
eliminate any' timing bias. It 

does not represents the actual 
return on the fends, but is ideal 
for comparison purposes, just as 
a redemption yield is widely 
used for comparing different 
fixed-interest stocks, even 
though it does not represent any 
practical return. 

- In addition to comparing man- 
agers, the time-weighted 
.approach, is. used^to compare, 
with standard indices. The FT- 
Actuaries All-Share, adjusted to 
a total return basis, is the stan- 
dard jneasurefor equities. 

- In several other areas techni- 
ques ere by comparison crude. 
Unlike equities, there is no 
ready market value that can be 
placed on property investments 
and - as a result it has to be 
valued by a surveyor speci- 
fically for this purpose. 

Each major estate agency firm 
in the commercial property 
field has its own property index. 

however, with no element of 
standardisation in the valuation 

The growth in oversas equity 
investment has brought prob- 
lems in performance measure- 
ment, too. Here there is a need 
to separate and identify the 
local market element ilfoqi. the. 
currency element. " ' 

Trustees need this perform- 
ance analysis, but a proper 
assessment would require daily 
information in building up the 
weighted return. 

The publication of the com-, 
prehemdve FT-Actuaries World 
Indices has,, therefore, been 
widely welcomed by the 
performance measurement 
firms as providing a valuable 
benchmark for assessing over- 
seas investment. 

Finally, there Is a need to 

identify and measure the risk 
element of a portfolio. At pre- 
sent a 10 per cent yield on gilts 
is given the same degree of 
influence as a 10 per cent yield 
on equities.. - 

Performance measurement in 
the US is centred around risk 
end:- volatility analysis, using a 
complex mathematical statisti- 
cal approach. However, "this 
treatment rests on the basic 
assumption that risk can be 
defined mathematically— a con- 
tention that is not completely 
accepted in the UK. 

In the UK. the approach is to 
identify the nature of the invest- 
ment risk in a pension fend by 
linking assets and liabilities, 
and liabilities are invariably 
expressed in real rather than 
monetary terms. 

Eric Short 



Consulting advice 

to help you answer all your key questions 


* How can we develop 
useful objectives? 

* What should our long-term 
asset allocation be? 

* What investment manager 
structure should we adopt? 


★ How can we monitor our 
'managers in meaningful terms? 

★ What should our review 
process involve? 


★ How can we select the best 
managers to suit our needs? 

* How can we get them 
to perform? 


For further details on our services and Investment Seminars 
contact Roger Urwin or Gail Richardson 

on 01-222 9121 

Asset Planning Department, Burwood House, 16 Caxton Street, London SW1H OQU. 











Financial Times Thursday May 21 1987 



New techniques 

Portfolio insurance can tame the bulls and bears 

THE HOST far-reaching and 
controversial technique that 

British pension hind managers 
have imported from the US over 
the past year has been that of 
portfolio insurance. 

On some estimates, the value 
of* assets, covered by portfolio 
insurance in the US is more 
than $60bn; and many cl aim 
that, at least on two occasions, it 
has had a destabilising effect on 
the entire US stock market 

The three pioneers in the UK 
market have been County in- 
vestment Management, the 
National Westminster subsidi- 
ary, which has initiated several 
quantitative investment techni- 
ques in the UK; Baring Fund 
Managers, in what has been a 
surprisingly bold initiative for 
Che subsidiary of a traditional 
merchant bank; and Chase Man- 
hattan Bank. 

Chase already has over $6bn 
covered by its portfolio insur- 
ance in the US, and has been 
building up a presence in Lon- 
don's securities markets over 
the last two years. So for, only 
County has won any substantial 
accounts, and it now has about 
£7Qm covered by its insurance. 

In the US, the hedging techni- 
ques that have been developed, 
are particularly attractive, be- 
cause they allow . companies to 
use the surpluses In their pen- 
sion funds to strengthen their 
own balance sheets. Different 
accounting and tax rules re- 
move such opportunities in the 
UK, but portfolio insurance re- 
tains several other attractions. 

The purpose of portfolio in- 

surance can be defined simply; 
to protect Investors from any 
loss of their capital in an equty 
bear market, . while allowing 
them to participate in the be- 
nefits of a bull market. The in- 
vestor has his capital “ in- 
sured" against a foil in the 
value of his equity portfolio, In 
return for sacrificing some of 
the bull market returns, a sacri- 
fice which represents the cost of 
the insurance premium. 

The mechanics of the opera- 
tion, however, are less 
straightforward. The simplest 
way to buy such insurance ought 
to be through the purchase of 
put options on a stock market 
index which tracks reasonably 
closely the returns oij the Inves- 
tor's portfolio. To insure a wide-' 
fy diversified portfolio of UK 
equities, for example; put op- 
tions on the FT-SE 100 index 
should provide reasonable pro- 
tection. If the stock market, and 
the investor’s portfolio, rises, 
the options will expire worth- 
less. If the stock market foils, 
the options can be exercised to 
o ffset 'all the losses. 

Few pension funds, however, 
will be able to follow such a 
strategy. First, it is difficult to 
'buy longer-term (and preferably 
out-of-the-money) FT-SE put 
options in sufficient volume to 
insure an entire portfolio, 
except perhaps at a prohibi- 
tively high price which would 
be well above the theoretically 
fair value. Second, even if a 
theoretically fair price for the 
options is. paid, this type of 
insurance remains expensive. 

When do you win (or lose) 

Return achieved 
by Pension Fund 

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m - 


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Mwket Index 

^ / 

/ / 

/ / 

Ttw depict* 

*- / 

(WO carman s*r soaogy Mnw equffits 

lam BU MM. Ha. It* 

and 0b [boots*] 

Third, the investor's portfolio 
may perform differently from 
the FT-SE 100 index. 

Portfolio insurance tackles 
this problem fay using a very 
different technique, based on 
.an application of modem port- 
folio theory- A "synthetic” put 
option is created on the equities 
in the investor's portfolio by 
continually shifting his assets 
between equities and cash or 
short-dated bonds in response 
to price fluctuations. County 
Bank also uses FT-SE 100 
-futures contracts as a substitute 
for buying or selling the under- 
lying securities. 

Suppose the investor speci- 
fies that, at the end of each year, 
be wants a guarantee that the 
value of his assets will not have 
fallen in nominal terms. If his 
entire portfolio was in short- 
dated bonds, assume that he 
would receive interest of 
around 10 per cent 
At the start of the year, his 
assets might be divided equally 
between equities and bonds. If 
the equity portfolio starts to fall 
in value, part of the assets 
would be shifted into bonds to 
compensate. The farther the 
equity portfolio falls, the higher 
the proportion of assets held in 

Pension funds may fieed somethlng slmpler 

bonds. Conversely, the sharper 
the rise of the equity portfolio, 
the lower the proportion held in 

The success of this strategy 
hinges on getting right the trig- 
ger points at which a rise or fall 
in values prompts a shift In 
asset allocation. Too sentitive a 
trigger point can lead to exces- 
sive transaction costs. More im- 
portant, in a period of no major 
stock market trends but just a 
series of small “whipsawing" 
fluctuations, the strategy can 
lead to a steady erosion of capi- 
tal values as the fond moves into 
cash just before the market re- 
bounds and moves more in 
equities just before it falls. 

BZW Investment Manage- 
ment, the Barclays bank sub- 
sidiary, has so for decided 
against selling the portfolio in- 
surance system that it has de- 
veloped because it bas con- 
tinuing doubts about whether 
its system can really deliver the 
correct results, and in particu- 
lar whether it can more or less 
guarantee the investor's capital 
against loss. 

Every fond management 
house that uses portfolio insur- 
ance in the US or UK has its own 
trading rules, although all are 
based on statistical analyses of 
patterns of stock market volatil- 
ity. County, for. example, has 
adopted a US system by testing 
out models on no fewer than 
1IM)00 “ simulated " years when 
different patterns of stock mar- 
ket volatility have been tried 

Some managers apply com- 
pletely mechanical computer- 
driven systems, others allow the 
individual fond manager some 
degree of discretion. Discretion 
has been emphasised more in 
the US as a result of the risks 
which have been highlighted re- 
cently of a sharp stock market 
movement triggering a mass of 
destabilising buy or sell orders 
from the computers of the port- 
folio insurance managers. 

The critics of portfolio insur- 
ance say that it is unsuitable for 
pension fluids, which are sup- 
posed to have a longtime hori- 
zon, although ironically they 
concede that it might be better 
suited to individual investors, to 
whom it has never been mar- 
keted. Undoubtedly the shorter - 
the time period over which a 
pension fond demands protec- 
tion (whether this protection is 
defined as no capital loss or just 
a small loss), the higher the cost 
of the insurance in terms of the 
loss of upside benefits. 

But portfolio insurance 
supporters argue that, just be- 
cause the downside risk can be 

removed for a specified time 
period, a pension fond can 
afford to put a higher propor- 
tion of its assets into a (pro- 
tected) equity portfolio and less 
into riskless assets. 

Thus* the real issue is 
whether, overall, the use of a 
protected equity portfolio with 
fewer assets in bonds and cash 

can produce a more fovourable 
risk-reward relationship for a 
pension fond than some form of 
conventional, and fairly static, 
allocation of its assets between 
equities and bonds. 

In effect, the sellers of port- 
folio insurance are implicitly 
assumi ng an inefficiency in the 
way the stock market values put 

options. Their claim is that in- 
vestors misjudge the foture pat- 
terns or volatility or the stock 
market, and this allows the port- 
folio insurer to buy synthetic 
put options at. a price below that 
which would be struck in a folly 
efficient market. 

Clive Wolffian 


Noble Lowndes has been the top name in pensions for 50 years. In 
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■ *. . . , ,-•* • > -v-n • ?;<%*gsr'-. 


Financial Times Thursday May 21 1987 


light on a crucial statute 

who act for pension funds have 
to be skilled tn the intricacies of 
taxation. Although the 1970 
lVinance Act calls a pension 
fUnd which has been approved 
by the Board of Inland Revenue 
a. a M exempt approved scheme,” 
tb<at does not mean that it is 
exempt from tax on all its 
inilome and capital gains. 

llhe exemptions laid down by 
parliament are interpreted very 
nan row ly by the Inland 
Btevianne, and Indeed the rather 
more generous interpretations 
which some pension funds' local 
tax inspectors have adopted in 
the past appear to be under 
retrospective review. 

Since nearly every word 
counts, here is what parliament 
said in the 1070 Finance Act, in 
subsections 2 and 7 of section 
21 : 

M (2) Exemption from income tax 
shall ... be allowed in respect of 
income derived from investments 
or deposits ... held for the pur- 
poses of the scheme 
" (7) For the purposes of capital 
gains tax, a gain shall not be a 
chargeable gam where it accrues 
to a person on Ms disposal of 

investments... held... for the 

purposes of the scheme ” 

Deposits are mentioned in the 
income tax subsection, but not 
in the other one. So, although 
the interest on. say, a dollar 
bank deposit is exempt from 
income tax, any rise in the dol- 
lar against sterling between the 
days of deposit and withdrawal 
produces a potential capital 
gains tax liability (subject of 
course, to indexation relief and 
to the annual exemption figure 
for pension funds, currently 

What is an investment ? 

The inlan d Revenue have con- 
sistently maintained a restric- 
tive interpretation of the word, 
based upon old High Court judg- 
ments. But new and welcome 
light was shed upon the ques- 
tion last July, in the Chancery 
Division, in the case of M arson 
(Inspector of Taxes) v Morton. 

In his judgment, the Vice- 
chancellor, Sir Nicolas Brown e- 
Wilkinson, said that, in 
determining the meaning of the 
word ** investment,” the courts 
need to have regard to current 
commercial practice and to 
modern markets and investment 

The Revenue are not taking 
the Morton case to the Court of 
Appeal, so it may be that they 
are at last beginning to doubt 
whether their rigid view that 

traded options, for example, are 
not investments has been 
justifiable since the London 
market opened, in April 197 B. 
There are long-running tax dis- 
putes involving those pension 
fhnds which entered the Lon- 
don traded option market 
before the day of the Royal 
Assent to the 1984 Finance BilL 
Parliament has intervened to 
end the dispute over whether 
certain financial instruments 
are investments, in relation to 
current and future transactions 
(without expressing any opinion 
as to their past investment sta- 
tus), by specifying that “ a con- 
tract entered into in the course 
of dealing in financial futures 
or (some) options shall be 
regarded as an investment" 
with effect from July 28 1984. 

In fact, as reported in the FT 
at the time, the Government 
conceded investment status to 
financial futures retroactively, 
but refused similar treatment 
for options. Furthermore, while 
the 1984 legislation covers all 
financial futures worldwide 
(and not merely those dealt In 
on recognised futures 
exchanges), it covers only a 
limited selection of option 

□ Warrants listed on stock 
exchanges designated by the 
Inland Revenue: 

B L ondon traded options; 

LCFFE (London Inter- 
national Financial Futures 
Exchange) options; 

□ Traded options on desig- 
nated stock exchanges overseas; 

Q CBOE (Chicago Board 
Options Exchange) and EOE 
(European Options Exchange) 
options (by extrastatutoxy con- 

In particular, the 1984 legisla- 
tion does not cover 
e Options on futures (except 
LIFFE options); 

• Stock Exchange traditional 
options; or 
e Commodity futures. 

Although the general tax law 
relating to options and futures 
was improved in 1985 (in rela- 
tion to options on futures and 
commodity futures), and 
although clause 88 of this year’s 
Finance Bill, as published on 
April 8, contains proposals to 
make further improvements (in 
relation to Stock Exchange 
traditional options and UK 
over-the-counter options etc), 
there appear to be no plans to 
extend the scope of the protec- 
tion of the 1984 legislation to 
pension funds that wish to make 

use of the full range of hedging 
instruments on offer at the pre- 
sent time. 

Where is the line between 
hedging and trading? 

This is an issue that affects 
many investing institutions, 
among them investment trusts 
and unit trusts; and it is too 
large to go into here. However, 
there are a few points where the 
question of trading is particu- 
larly pertinent to pension funds. 

Underwriting new issues 
might be regarded as a trading 
activity, using the Revenue's 
narrow criteria, but in fact 
parliament has specifically 
given pension Kinds exemption 
from tax on underwriting com- 
missions (provided that the 
underwriting does not consti- 
tute a trading activity). This 
happened as long ago as 1971, 
and no pension funds seem to 
have been assessed as traders 
in respect of their underwriting 

In sharp contrast, the 
Revenue have been sticking 
firmly to their contention that 
stocklending by pension funds — 
lending stock to facilitate deals 
on the Stock Exchange, in 
accordance with procedures 
agreed with the Revenue — is a 
trading activity, and the Chan- 
cellor has so far declined to put 
stocklending on a par with 

The refusal of exemption for 
stocklending fees probably has 
no effect upon the amount of tax 
collected from pension funds, 
because the prospect of a tax 
bill effectively discourages trus- 
tees from agreeing to lend stock 
to the market The fees are mod- 
est in relation to the trouble of 
lending stock, and having to pay 
45 per cent tax makes the ser- 
vice uneconomic. Why 45 per 
cent tax ? Because pension 
funds are only exempted from 
the current 18 per cent sur- 
charge under section 16 of the 
1973 Finance Act in respect of 
“ income from investments, 
deposits or other property held 
for the purposes of a fund,” and 
that description does not cover 
stocklending fees. 

If the management of a pen- 
sion Kind's portfolio is divided 
between external investment 
managers, there are two special 
pitfalls to beware of. One is 
statutory, and the other 
depends upon the view taken by 
the Revenue. 

If the independent investment 
managers take different views 
of the prospects ot, say, ICI 
stock — there being none in the 

portfolio managed by Manager 
A but some in the portfolio man- 
aged by Manager B— it may hap- 
pen that Manager A buys ICI 
stock and then Manager B sells 
ICI stock a week or two later, 
after it has gone ex dxo. 

The trustees will find to their 
dismay that they have fallen 
foul of Section 473 of the Taxes 
Act, which is aimed at a sort of 
sharewashing operation, and 
that they cannot recover much 
of the 36.99 per cent (27/73rds) 
tax credit on the ICI dividend. 

The other danger, if this hap- 
pens more than once, is that the 
Inland Revenue may suggest 
that such short-term turnover 
constitutes dealing, not invest- 

The tax problem of foreign 
curr ency bank accounts was 
mentioned towards the begin- 
ning of this article, but there are 
other tax worries for pension 
funds with foreign portfolios, 
where the trustees think it pru- 
dent to hedge the exchange 
risks. Some currency options 
are protected by the 1984 
legislation, and so are all 
currency futures; but what 
about forward sales of 
currency? As Foreign currency 
is not regarded by the Revenue 
as an investment, a capital gain 
on a currency transaction car- 
ries a potential CGT liability; 
but is it a capital or is it the 
profit from an adventure in the 

nature of trade? There appears 
to be an extrastatutoxy conces- 
sion covering forward currency 
transactions with a clear link to 
investment transactions, but . 
how dear does that link have to 

There are many other puzzles 
and oddities— I have not even 
mentioned works of art or wood- : 
lands, nor the intriguing conse- 
quences of the fact that the capi- 
tal gains tax exemption in the 
1970 Finance Act is not 
required (by Section 36(4} of 
that Act) to be construed as one 
with the Capital Gains Tax Act 
1979— but maybe, at least, it Is 
clear that rationalisation of 
pension fond taxation and 
exemption is long overdue. 

It ought to be possible to pro- 
tect the Revenue against abuse 
of the system by a few Kinds, 
while enabling the investment 
decisions of the great majority 
of pension Kind managers to be 
taken against a background of 
fiscal neutrality- 

■ — ■- mm 

ttaipfl iwwro 

Sptoar and Pqpar 

ONCE AGAIN. L'K pension 
funds have turned in a sparkling 
year, profiting from the heady 
growth of the world equity 

The top return for pooled pen- 
sion Kinds in 1988 was from 
Bail lie Gifford, which added a 
healthy 38.5 per cent to its 
clients' investments. The 
median return of 24 per cent 
was also high, and even the bot- 
tom performing .Kind at 13.6 per 
cent covered clients' liabilities. 

Pension Kind liabilities are 
linked to earnings and inflation, 
and last year both were kept at 
the comfortably low rates of 7.4 
per cent and 3.7 per cent respec- 

In 1986, for the frith year in 
succession, there were strong 
real returns for pension fends. 
While, as would be expected, 
the tops and bottoms are less 
extreme, the average return 
over five years remains at 
nearly 24 per cent, and at a 
healthy distance from inflation 
and earnings rates of growth. 

Yet, what the bald statistics 
do not show is the upheaval that 
has taken place in the pooled 
pension fund market during the 
intervening years. While, only 
five years ago, the market was 
still dominated by the life 
offices with their traditional 
managed funds, last year most 
places in the top 10 were firmly 
in the hands of the unit trust 
companies — only three life 
offices even got a look in. 

Five years ago, few unit trust 
funds existed. The pooled pen- 
sion flind market had grown up 
in the early 1970s, when life 
offices introduced them as an 
alternative to insured Kinds and 
direct investment 

It was not until the 1980s that 
the . unit trust companies 
entered the field Led by Mur- 
ray Johnson and Martin Currie, 
several of the leading invest- 
ment houses set up single . 
exempt Kinds. These were unit 
trusts which were, in fact, very 
similar in constitution to man- 
aged Kinds. Subsequently, 
“packaged" exempt funds inves- 
ting in a range of m-house Kinds 
were introduced by managers 
such as Baillie Gifford and Hen- 

The life offices were almost 
caught napping as the more 
aggressive unit trust houses 
turned in slick presentations at 
the investment management 
beauty parades— as the selec- 
tion of pension Kind managers 
is aptly called But the unit trust 
managers were not just slick. 
They differed from the traditio- 
nal managers in two important 

They offered high exposure to 
equity markets at a time when 
world markets were showing 
very good returns, and they 
offered flexibility and indi- 
vidual attention in a way the life 
offices never had. Flexibility 
was particularly the feature of 



Qw war (31 Pec 88-31 Pec 88) ft* J— » P 1 P** 

SailUfl Gttford (P) 35.8 Confafrat ta W (U 

Martin Currie (S> 32J2 FraSW Green (S) 

London & Manchester W 32.0 Alexander S»nfi0v*fl 
Fidefltv tntKP) 30.7 Scottish WidWS ft) 

2 Martin Currie (S) 3L2 Fra3« 

“i London & Manchester ^ 32.0 Alexan 

4 fidelity Inti (P) 30.7 Scottfa 

5 HendMSon <P ) 30.7 . National Pro* fori ft) 

“5 Murray Johnson (5) 29.6 ProvWent Mutual (0 

7 Confederation life (U 28.9 Sun Lift (U 

8 Chemical Bank (5) 28.8 Bankers Trust (S) ~ 

9 Mercury Wartatfg (P) SB.3 Clerical Medical (L) 

10 Sun Life (L) 28.3 Crown UfB (1) 

Total fluids S3 

Fund average return 24.0 

National a verage Barrings 7.4 

Retail Prices index 3.7 

(D-llfe office managed fund (S)* 5 single exempt fund 
(P) -packaged exempt fund 

Source: PonHonm Manegaowm. April 1887 

Dm a*} 


Pooled funds 

Life offices lose 
ground as unit 
trusts accelerate 

the packaged exempt Kinds, 
which, by offering a range of 
Kinds, could 'be used to match 
tiie needs of individual pension 
Kinds more closely. 

Indeed, many of the unit trust 
companies managed to deliver 
what they promised. All of those 
in the top ten for 1988 had 
extremely high exposure to 
equity investment at home and 
abroad. The total average 
investment in equities was 85 
per cent and, in the case of 
Baillie Gifford, was as high as 88 
per cent By comparison, none 
had any investment in property; 
and the rest of the mix was 
made np of fixed interest, cash 
and small investments in index 
linked gilts. 

Of the top perfbrmisg life 
Kinds over a five-year basis, 
only two managed to compete 
with the unit trust managers last 
year— Confederation Life and 
Sun Life. Looking at the asset 
allocation, the life Kinds tend to 
a broader base of investment, 
with more Kinds in property and 
index linked gilts. They, too, 
had a high exposure to equities 
last year, but not as high as the 
unit trust companies. 

Robert Baker, of Mercer 
Fraser, conducted the pooled 
pension Kind survey for Pen- 
sions Management He explains 
** At present, there is a trend tor 
unit trust services to do better 
than the life offices. One reason 
is, quite a few of them are 
relatively new and relatively 
small and can therefore be 
more flexible in their 
strategies. But, as they grow lar- 
ger, it is difficult to see tills 
advantage continuing. “ The 
Scottish Widow’s Kind is now 
over £2,000m, and Scottish 
Amicable's is £L,800m. 

“ The second reason is that 
unit trust services tend to be 
offered by managers with a 
naturally high weighting in 
equity markets. For Kinds to 
have done well in the last five 
years, a high equity content 
helped," says Mr Baker. 

Yet, it Is not just a case of 
being in the right market at the 
right time. In an equity market 
it is also vital to be able to select 
the right stocks. 

“Logically, sector selection 
seems most important, but good 
stock selection will coma 
through over the long term. For 

exatoplt* Confederation Uf 
has a relatively conaervatw 
asset mix. but is of the top 
performing fends because their 
investment managers were able 
to select stocks very well, • says 
Mr Baker. Confederation Life a 
IMS asset mix waa equities 65 
per cent, fixed interest 20 per 
cent, property 6 per rent, cash 8 
per cent The manager* were 
also top performing fend over 
the 10-year period (1976-66). 

The new blood of the unit 
trust managers on 10 the market 
has widened dramatically the 
alternatives tor pension fend 
trustees- Rut the choice is made 
very difficult at present, 
because most of the unit trust 
managers are so new In the 
management of pooled pension 
fends. As every investment rule 
book says, It is foolhardy to con- 
centrate too much on short term 
performance statistics and this 
is especially true tor pension 
fends, whose long term liabili- 
ties mean one year's investment 
returns is just a drop In the 

Robert Baker says “ Ideally, 
you need a three- to five-year 
time-frame, and for some invest- 
ment houses there last a suffi- 
ciently long track record to tell 
whether their success is 
because they are good or lucky. 
Where we do recommend unit 
trust services to our clients is 
where they have track records 
of another sort — perhaps in 
individually managing pension 

But the managers ham not yet 
experienced a fell market cycle, 
and a key question is how they 
would perform If equity markets 
were not so strong. Mr Baker's 
answer is to point to studies 
which show that equities have 
done better than gills, for inst- 
ance. over the longterm.’* When 
a pension fend chooses an 
equity-biased manager, they 
will get a bumpier ride, but if 
they are prepared to stick with 
them, the long tens strategy will 
come through," he predict*. 

Performance tatties are 
important then, but are not the 
only factor that trustee* should 
consider. MUm Antony, of the 
successful unit trust managers 
Hendersons, agrees, “Trustees 
should look tor the sort of mana- 
gers whose style of philosophy 
soils them. Some people are 
more comfortable being part of 
a big managed fend." A rule of 
thumb should be: look at the 
performance tables, . but also 
think about “ comfort and 
style.” he says. 

The other actors that Mercer 
Fraser direct . their pension 
fund clients to are: the risk pro- 
file (not usually evident from 
performance tables), the status 
of the organisation, the con- 
tinuity of membership of the 
investment teamyaad the deci- 
sion-making: process on asset 
allocation and stock selection. 

Leigh MopWnson 


-Ln 1978 we managed 10 Pension Funds 
worth in total £7.5 million. 

Today, we manage or advise 126 Pension Funds, 
worth in total £335 million. 

Because Professional Trustees are not overly 
influenced by slick presentations, we can only 
conclude that our success has been the result of 
the efficient administration and the above-average 
performance we have consistently provided. 

If you want to find out what we can do for you: 
contact Tony Pattison, 

Head of the Fund Management Division. 


Members of The Stock Exchange 
01-236 5080 
65, Holbom Viaduct, 

London EC1A 2EU and Edinburgh 
Tfelex 886653 PROCUR G 

Member of the ANZ Group 

Our working day. 

While you sleep, our network is working. 

In New York, a revolutionary index- 
matching system with worldwide applications 
has been approved after months of thorough 

In Sydney, our investment managers 
have evaluated the implications of new reserves 
found by a major mining company and 
instantly alerted our offices around the world. 

In Tokyo, a meeting of our investment 
managers is preparing an analysis of how an 
unexpected economic development in Japan 
will affect world financial markets. 

Their recommendations will appear on 
all Bankers Trust screens .within the hour. 

Across the world, the meetings, analyses 
and decisions that give us hard core investment 
strategies are shaping the future for your UK 
pension funds and liquid assets. 

And here in London we add our own 

judgement to create the portfolio strategy that 
will exactly match each of our clients needs. 

But what about performance? Do our 
strategies, our systems and attitudes produce 

Yes, they most certainly do. 

Wc’rc one of only a handful of inter- 
national asset managers in the UK producing 
consistently outstanding investment results, 
whatever your objective. 

What can we do for you? 

Call Roger Whittaker for more infor- 
mation on 01-726 4141. 

Or write to him at B 1' Investment 
Management Ltd, Dash wood House, 69 Old 
Broad St, London EC2P 2EE, {Telex: 883341). 

BT Investment Management Ltd. 
D Ban k e r s Trust Co mpany 


Financial Times Thursday May 21 1987 



to£35,000 + Car 

We are acting on behalf of a prestigious UK 
Investment Bank who wish to recruit a bright 
and energetic Chartered Accountant to lead 
die management accosting team. 

experience in the financial 

be responsible . for financial planning, 
projections and budgeongfbr the group. 

For further details please contact Jon Michel 
or Phifippa Dflley (who can be contacted 
03^ depfiFicehourson 02-5743891). 


c£25,000 + Car 

Our client aUS Corporation seeks to recruit a 
Financial Director Designate to head up a new 
operation in the United Kingdom. 

The successful candidate must be a fully 
qualified A.CJL, ideally aged between 25-35 
with several years', experience in a financial 
control environment. He/she will be 
responsible^ for the entire financial and 
ad m i n istrative . functions. This will include , 

To discus? this position further; please contact 
Giles Daubeaey (who can also be contacted 
on 01-870 7197), ; 

Badenoch & Clark 


TELEPHONEOI -083 0073 


Dow Chemical lines up 
new chief executive 


Mr Frank P. Popoff, 51, has 
been elected president and 
chief operating officer of Dow 
Chemical Company, the second 
largest US chemicals company 
— after Du Pont — based in 
Midland, Michigan, and is to 
become Chief executive on 
December L 

Mr Popoff is to take the lead 
at Dow on the retirement from 
this office of Mr Paul F. 
Orrefice on bis reaching the 
age of 60, in line with com- 
pany retirement policy. Mr 
Orrefice will, however, 'remain 

Hr Popoff - has been an 
executive vice president of Dow 
since 1986. Dow's four execu- 
tive vice presidents — Mr 
Hunter W. Henry. Mr Robert 

M. Keil, Mr Keith R. McKennon 

and Mr Joseph G. Temple Jar 

— are to report to him. 

Mr Hunter W. Henry, 58, 
executive vice president. Is to 
assume overall management 
responsibility for all non-TJS 
areas of Dow Chemical and its 
global operations. The presi- 
dents of Dow's five non-US 
areas — Brazil, Canada, Europe, 
Latin America and the Pacific 

— will report to Mr Henry, as 
will Mr Donald A. Blfcard, vice 
president and corporate director 
of manufacturing and engineer- 

Mr Keith 2L McKennon, 53, 
has been appointed an executive 

Taking stock: the operating board of Dow Chemical earlier 
this year — left to right, Mr Paul R. Orrefice, Hr Robert M. 
Kell, Mr Keith B. McKennon, Mr Hunter W. Henry, Mr 
Joseph G. Temple, Jr, and Mr Frank P. Popoff 

vice president of Dow Chemical 
and president of Dow Chemical 
USA in succession to Mr Henry. 
Mr McKennon is also to have 
management oversight responsi- 

bility for the company’s 
research and development 
activities and for the govern- 
ment and public affairs depart- 

money men 
quit in 

have resigned from Citibank AC. 
the offshoot of the biggest US 
bank, to make a total of eight 
to have left the New York-based 
bank’s Frankfurt securities divi- 
sion in the past six months, 
reports AP-DJ. 

Mr Dieter Wermuth, head of 
research, and Mr Michael Hopf, 
bond salesman, are to join the 
Frankfurt syndication depart- 
ment of Manufacturers Han- 
over. Citibank's New Yodt rival 
This department is headed by 
Mr Bernd Meuller, who, along 
with three others, left Citibank 
in April. 

Mr Udo Jensen, chief equities 
trader for Citibank AG, is to 
move to a local brokerage firm. 

Last week, Mr Juergen 
Figure, who headed Citibank 
AG’s syndication department, 
announced his resignation to 
join Zndustrlebank von Japan 
* * * 
MGH/UA Communications Com- 
pany, of California, has 

announced that Mr Cy Leslie, 
chairman and president of its 
MGM.'UA Home Entert ainm ent 
Group, is to relinquish his duties 
on June 1. 

Mr Leslie, 64, had previously 
announced bis intention to step 
down from his current post 
rather than to move to the West 
Coast when the MGH/UA home 
video concern changes its cor- 
porate headquarters from New 

Investment banking 
changeover at 
Bankers Trust 


the main operating arm of 
Bankers Trust Inc, the New 
York - based, internationally 
operating bank bolding com- 
pany, has announced a widening 
of responsibilities in its invest- 
ment banking side for Mr Ralph 
L. MacDonald, 45. 

Mr MacDonald has extended 
his responsibilities from a 
financing role in the investment 
banking set-up of Bankers Trust 
to include advisory matters. 

This follows the resignation 
of Mr David O. Beim, 46, who 
is understood to have left the 
advisory positions in the 
Bankers Trust set-up, to pursue 
investment banking opportuni- 
ties elsewhere. 

The changes come at a time 
when Bankers Trust mid other 
US commercial banks are chip- 
ping at the edges of the Glass- 
Steagall Act, which was put into 
operation in the thirties to 
separate the activities of 
deposit-taking banks using the 
money so raised as their main 
field of operation from the 
activities of investment banks, 
more closely involved with 
financial services. 

It is only this month that the 
Bankers Trust group, as repre- 
sented by the holding company, 
together with some other com- 

mercial banks has been given 
court approval to widen its 
sphere of operations in the 
investment banking field — in 
the case of Bankers Trust 
through BT Securities, a sub- 
sidiary of the holding company. 
The number of banks involved 
in this widening, first three, has 
been increased this week. 

Mr MacDonald’s field lay pre- 
viously in the financing of such 
things as management buy-outs 
— a growth industry in the US 
— of mergers and acquisitions 
in general, and in things such 
as municipal financing and 
capital markets. Mr Beim leaves 
a clients’ advisors' role in this 
connection to be taken over by 
Hr MacDonald. 

The recent court decision 
widens the Bankers Trust group 
powers to include in its 
activities underwriting (which 
covers if necessaiy taking up 
Issues as a principal) and to 
deal in commercial paper, 
municipal revenue bonds and 
(home) mortgage-backed securi- 

An associated change brings 
Mr Eugene B. Shanks into the 
position of forming relation- 
ships with financial Institutions 
and getting together capital 
markets and public financing 

Accountancy Appointments 




Qualified 25-29 

£25k + car 

Ourcfientis a subsidiary of a major BritisfiHjC, with a 
repiitatkjiifocaggressive marketing policies and a continued 
ro mirntment tn organic and aoqnisithie pmroth. They have an 

role in motivated management ream. 

Reporting to djeHoauce Director the incraidjent willheadxip a 

fan ffi teptri staff Arrn qTntnhilrrira will bet bmflrt . 

anri ^mytanly W-hidedig 

withlheerer growing organisation. 

Tbeai vi r Dnm entwodd suit an mdwidual possessing that rare 
rnmlimarirUT of financial expertise, mminenrifll arm runr aryl thg 
^jil^tDcommTmkatEefie^^wfth managers at all levds. 

succ e ed me g qivlronro eiit &e rewards wiK be 

substantial andtbe opportunities fcc career^rt^resacHiexcdleiiC. 

For fuiAerinibrmatioo please contact Rath Allen on 
01-930-7850 or write endosing brief details to the address below 


66-68 Haymaitoet London SWIY4RF Telephones 01-D30 7850 

Finance Director 



to £22,000 4- Car 4- Bonus 

Our client is a highly successful, rapidly expanding, privately 
owned group of companies ’ engaged in the rale and 
distribution of high quality business equipment throughout 
the North of England. Since their establishment in 1979, 
their growth in turnover and profitability has been exc e p- 
tional and may lead to a flotation in the medium term. 

Candidates, aged 28-40, will be qualified accountants 
(ACCA, CflvlA, ACA) who can demonstrate a trade record 
of achievement in a fast moving business env i r o nment 
coupled with, well developed inter-personal dolls to ™tr a 
positive i mp act cm this marketing orientated c o mp an y A 
board a p poi n tment is envisaged in due course. 

They now seek to rec rui t a Financial Controller who, . 

repotting to the -Managing Director, will be completely Comprehensive relocation tadUdes . are available where 
responsible for die finance mid data processing functions. In ap pr opri ate. Interested applicants should write to Stephen J. 
addition to the normal financial responsibilities the Broadhurst or Angela McDermottroe, quoting’ 

successful applicant will be expected oo input - TC ^ L8335, ac M ic hae l Page Partnership, 

significantly to strat^ic business pfenning andr to Leigh House, 28-32 St. PauTs Street, Leeds 

OTyr aH rorniTtgr clal management of the bmrncm. LSI 2PX. (Tel: 0532 450212). 

I overall corn 


Michael ftge Rntnersfaip 

International Re a uitmenc Consultants 
London Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 
Amember of Addison Consultancy GroupHJC 

Planning Analyst and systems Accountant 

Build systemsfor the Future 

"A leader in supplying worldwide f n fom i wtinn services to 
the community is seeking to stren g then ifs UJC 
function. As a subsidiary of an international bank, the 
f-ftm panytgAx paTwting It s global operations from its Lond on 
headquarters. With & history of solid expansion, the 
company'* provision of audios real-time geenz ity an d 
commodity 'ftdjnwwatinn has es tabl i sh ed its powerful 

presqacaiDthfllT m ar ketplac e. 

This is a hew London based appointment and your oner 
ipMjallr will bato conduct studies and m ak e rerommeayl- 
atkms to replace and improve existing systems. You will be 
instrumental in the identification, development and 
fawfalUtian of new facilities. In addition you trill take 
responsibility for &- variety of costings paring and f i nancial 
modelling projects and giroa commercial interpretation ca 

A qualified accountant probably late 20s, you will have 
considerable experience of computerised systems and 
financial analysis planning, ideally in the high-tech or 
service sector. You axe a comfortable computer user; 
experienced in die use of spreadsheet software. A self 
starter with initiative and a creative; persuasive approach, 
you wfii have wide scope for providing advice ana support ■ 
to management 

In addition to an attractive salary and range of benefits, a 
wig wham neoasare. 

Please write with career , and salary details, in complete 
confidence to Jane Combea or Helen Stephans of Cripps. 
Sears & Associates T.imitpHj Personnel Management 
- fjorw oiltante, TntereatinnalBuildniQS. 71 Kinqsway, London. 
WC2B 6ST Telephone-. 01-404 5701. 





Hltl Samuel Investment Services 
If you’ve got what we want we 
can provide you with a unique 

We are seeking men and 
women with financial or sales 
experience to work in the 
Berks, Bucks, Oxon and Hants 
areas based at our new 
Windsor offices. 

Full training and support is 
provided to enable you to pro- 
mote the full range of our 
renowned products. 

Please write enclosing full 
CV to: 

Matthew Mackusidc 
50 Pall Mall, London SW1Y 5JQ 


leading to 

Senior Management 

ACA or ACMA Age 24-28 
c. £18-20,000 + benefits + car 

Our client, a very well respected international industrial Group, is fully aware of the 
intense competition to secure die services of young accountants of high potential 
However; it has devised a unique, but well proven, method of developing Financial 
Managers in a way which offers genuine scope for diem to aspire co general 
management or very senior financial appointments in their late 30fc or eady 40k 
Initially, die successful candidates (two vacancies currently) will gain direct 
experience of corporate finance and treasury affairs along with die practical 
aspects of financial control encountered in its manufacturing and services 
operations situated in the UK, Europe and USA. After gaining broad experience of 
the operations of the Group, the Financial Managers will be offered substantive 
appointments, die nature of which will depend upon the Group's needs at the tone 
and the individuals 1 personal preferences. Location is likely to be the UK, 

Wes tern Europe or the USA. 

A range of experience and qualifications could be appropriate, but the essential 
requirement is that candidates should be graduate accountants (chartered or 
ACMA) who have trained or gained experience with a leading firm of accountants 
or commercial organisation, in London or the provinces. Interviews may be held in 
a number of locations. 

Please apply to: Anthony Jones, Career Plan Led, Chichester House, Chichester 
Rents, Chancery Lane, London WC2A 1EG. Tel: 01-242 5775 
(Home no: 01-348 3641 between 730-930 pm) 

.Personnel Consultants , 


Information analysis and business strategy . . . 

Divisional Controller 

Service Industry 

c£55,000 + car 

A major service company, our client has an enviable 
reputation. A worldwide organisation, the highly 
profitable company is undergoing rapid expansion 
throughout its UK business sectors. 

Based in the London headquarters, the Controller 
will provide both financial and commercial advice to 
the management of the company's fastest growing 
division. In a demanding project oriented position 
requiring a high profile within both the division and 
the company, he or she will initiate systems 
development, review, analyse and 
present information and 
participate actively in the 

ittiate systems Please write, c 

3 and ar 

IB mm IB fe^sJ o Da 

ps ) i PiTi M Ira iin& 

management of the division. The impact of the role 
is expected to be considerable and the continuing 
rapid growth of the company should lead to 
enhanced responsibilities. 

In their early 30s, applicants should be graduate 
accountants with broad commercial experience, 
ideally gained in the sen/ice sector. Seif confidence, 
analytical ability and strong presentation skills are 

Please write, enclosing a career/salary 
history and daytime telephone number, 
to David Hogg FCA quoting 
reference H/597/LF. 

125 High Holbum London WC1V 6QA Selection Consultants 01-405 3490 


Financial Tunes Thursday 211987 


Gty c. £25,000 plus car and benefits 

Our client is the international division of a 

major UK bant with assets of more than 
£20bn and income approaching £500 million. 
Following the promotion of the present 
incumbent, there is an urgent need to remut a 
manager within the financial Control 
department to lead die young and enthusiastic 
management repo r ting and analysis team of 8. 

The team's task is to produce a wide range of 
monthly financial re p orts and detailed analyses 
of significant trends and resufcs. The manager's 
role is to continuously enhance the timeliness, 
format and accuracy of reports prepared by the 
team and the quality of the analysis and 
commentaries submitted to senior 
management This is a high profile 

role requiring considerable accounting, 
fe ft»T p»r OTml a n d management drills in p 
sophisticated and highly computerised 

Candidates should be young graduate 
chartered accountants with a first dass trade 
record and with experience of large, complex, 
international corporations, gained both within 
the profession and in commerce, hi addition to 

the salary quoted and a cat the bank offers the 

fell range of benefits usually associated with 

the finawrfrl certmr nf the wiaAtf, *t*\ eireflynf 

promotion prospects. 

Please write m confidence with fell career 
details, quoting reference 6335/L to 
John W. HDls. 



Peat Marwick McLintock 

Executive Selection and Search 

9 Creed Lane, London EC4V 5BR 

| Hi-Tech Opportunity | 

* Financial Manager * 


Our client is an autonomous division of a major 
international corporation whose success has been, 
built on technology serving a variety of industries. 
The division designs, manufactures and markets 
sophisticated test and measurement equipment. 

As a result of internal promotion they now seek to 
appoint a Finance Manager. Reporting to the 
F inancial Controller and supervising 8 staff you will 
he responsible for all monthly financial 
reporting, planning and forecasting, systems 
development and ad hoc project work. 

c £20,000 

Ideally, applicants will be graduate AGAorACMA, 
with an excellent track record of achievement to 
date. The successful candidate will have die ability to 
communicate effectively at senior level as part of the 
overall management team. 

If you are ambitious and fed this maybe the 
opportunity for you then please contact Marie 
Carriban ACA on 0753-856151 or write enclosing 
a comprehensive CV to: 

Michael Page Partnership at 
Kingsbury House, 6 Sheet Street, 
Windsor SL4 1BG, quotmgreference SV 1054. 

Michael Rage Partnership 

International Recruitment Consultants 

London Windsor B ristol St Albans Bin ningh atn Nottingh am Manchest er Le eds Glasgow & Worldwide 

A member of Addison Consultancy Group PIG 

□ Senior Financial Manager I 

i j piei/ . * 

City based 


Our client is a successful brokerage house dealing in 
futures and foreign exchange. The company has an 
excellent record of growth and profitability and 
operates internationally. 

They currently require a Senior Financial Manager to 
join their Head Office team with responsibility for 
providing monthly management accounts and 
statutory accounts and developing computer systems. 
They will also become involved in the financial 
control of treasury and operations. 

The candidate sought will be aged 26-34, a 
Chartered Accountant with a-“big 8” 
background who has either reached 

management levd within die profession or has gained 
relevant experience within a city based financial 

For an above average performer who is prepared to 
work extremely hard and become involved in die 
broader aspects of an expanding company, the 
prospects for advancement are excellent. 

Interested candidates should write, enclosing a 
curriculum vitae and daytime telephone number, 
quoting ref. 394 to Philip Rice MA, ACMA, 
Executive Division, at 
39-41 Parker Streep 
London WC2B 5LH. 

Michael Page Partnership 

International Recruitment Consultants 

London Windsor Bristol Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 
A member of Addison Consultancy Groi^flC 


Financial Controller 

Bromley, Kent £Neg + car + benefits 

K ine mg 

■ Londo 

Contiki Travel arc an expanding lei*ure group specialising in 
holidays for the 18-35 age group. The group currently 
operates in ewer 25 countries and has a firm conumancac to 
fumic development and expansion. Group turnover 
c ur ren tly exceeds $50m. 

Reporting: to da Regional Managing Diimo*;ihe Financial 
Controller will have full responsibility for die financial and 
administrative aspects of the European operation. 
Controlling a team, of deven , the position will be responsible, 
for management and financial accounting, company 
^ m ^j^nT^ ^^iWT gtarial fencJinn s asvBeflMfogdier 
HfV-foimifflr ■ff* "iWwnmfn f nqfrral 

management informarinn system*. The position 
will involve some European travel.- 

accountant sgrf 2 M 5 ** * •* 2 ********* 

commercial MtaM idea!** i 
Essential will be the ability to com mu oka w effective* wtm 
senior management* well m the 

completion. ^ 

This is an excellent opportunity piwulinf **•! prwpecttW* 
move into general managmenr fee the right candidate. 

If you believe yon have the ability, determination and 
commercial approach that out diene require*! conua 
Tim Fot*rer on 01-83 1 2000 oc written hint « 

Michael Page Partnership, 

g^ ptif rn Home Cotmtae* Division, 

39-41 Parker Street, London, 

WC 2 B 5 LH. 

Mkhad Rage Partnership 

International Recruitment Consultants 

London Windsor 

A member of Addison Corisultancy Group FtG 

Senior Finance Executive 

Top level pic appointment 


c£40,000 + tonus + share options 


Our client is a highly successful and 
fastexpanding pubfidy quoted industrial 
group of autonomous companies, with 
exciting growth prospects both fn the 
UK and overseas. The entrepreneurial 
flair and strength of the Board is 
reflected by recent record profits. 

This new appointment wBf cany 
responsibly for operational accounting 
matters throughout the group. Reporting 
to the Group Finance Director the role 
will also involve active participation in 
the review; integration and divestment 
of acquisitions and Investments. 

A qualified accountant probably in 
Ms or her late 30's is sought Experience 
should include both group and 
operational roles with exposure to 
the various levels of a management 
structure, ideally within a rragor pic. 

This exciting position will not suitthe 
average performer: The person sought 
wiU stand out from the crowd as being 
able to demonstrate ambition, 
dynamism, innovation and self 

Salary wiH not be a problem for the 
right person and in addition benefits wffl 

Include share options, bonus and 
quality cac 

As advisors to our client we wM foty 
respect the confidentiality of wkiNM 
approach from those Interested in 
discussing this further;' 

Alternatively please write with a full 
CV quoting current salary and reference 
MCS/5083 to Barrie Whitaker 
Executive Selection DMsion 
Price Waterhouse 
Management Consultants 
No. 1 London Bridge 
London SEL9QL 

Price Wcterbouse O 

Is, vj uvemmi 


Chief Accountant 

South Midlands £20,000 phis car 

This successful £40m turnover engineering company, an autonomous part of 
a major Pic is looking for an ambitious accountant with the ability to 

Reporting to the Finance Director, the candidate will have control of the 
finance function and, in particular, will have an important involvement in 
further computerised systems development in a manufacturing environment. 
Aged between 28 and 35, the candidate will be a member of one of the three 
major accountancy bodies, likely to be a graduate, will be ambitious and 
developing a commercial awareness. 

Cai mrjg ospects are excellent in this successful company for foe appropriate 

O App&xiions arrwckomtdf mm career details, Muting salary progression, to Jatm Eliott FCA. Director, 

M S 4 decdon, Monaco House, Bristol Street, Birmingham. BSTAS.or Oty 

|Cf flllCBTMl Houx \^ e f d J^ man Nottingham, NCS 6 BH, or telephone 021-622 3838 or 0602 470249 
v liven I Ull res P cctivel yfi >r on application form, quoting reference 11 / 1625 . 



SW London 

c.£30,000 + Car 

Our client is a successful privately owned group of companies 
operating in the UK and overseas in specialist <xvH engineering and 
building contracting. Current turnover is approaching £15 million and 
there are plans to develop organically. 

The company now wishes to appoint a Finance Director who will report 
directly to the Managing Director and .will be responsible for all 
financial and secretarial matters in the UK and overseas companies. 

Candidates aged cSO-45 must be graduate qualified accountants 
(preferably chartered) and will have had several years construction 
industry experience at chief accountant/controller level. Well 
developed business and personal skills and a willingness to travel are 

Please write in complete confidence, Including a daytime telephone number to 

Edward Ross-McNaim, (quoting ref. F7107), 

Clark Whitehall Consultants, 

25 New Street Square, London EC4A 3LN. 

(M Clark Whitehall Consultants 

Executive Selection 


Finance Director 



to £40,000 + car + bonus 

This vital post calls Jot an Accountant committed to the management of change. 
Our Gient-is a successful privately owned Group of Companies principally 
engaged in manufacturing for the dedronics market They employ over 400 peopk 
on tfare^ sites in the UK and are aboutto embark upon an ambttioiKpmg ramTTw of 
reorganisation and modernisation. 

Working doseiy with the young Grief Executive and his Deputy, the successful 

candidate will have M responsibility for the day-to-day control and administration of 

tte Group as well as taking part in the development and execution of business plans. 

Applicants will ideally be graduate accountants, aged around 35 years, with a 
background in manufacturing. Thar experience should include the desi gn and 
implementation of financial controls and systems together with halamr o 
responsibility. They must demonstrate the ability to communicate ataH levels, mainh.^ 
standards of excellence and exert die same [discipline and enthusiasm for the control of 
daily tunning costs as they would for .the acquisition of tomorrow. 

Ref ^§^4726**^ should be sent in the first instance to the address below quoting 


- . . IJMITr.0 “ 

44 •Wellington Street, London WC2E7DJ. 


Standard Chartered Merchant Bank is «w>ifiwg 
an auditor to join its Internal Inspection team. 

The role will provide a broad exposure to the 
Bank’s diverse activities and should prove a 
challenging: environment for an articulate young 
accountant ox banker with, a talent for problem- 

The successful candidate will be involved in 
reviews of controls and systems as well as special 
p roject s with the emphasis on recomme ndin g im- 
provements to operational procedures. They wfil be 
expected to have the ability and motivation to develop 

computer audit skills and knowledge of compliance 
procedures. The confidence, initiative and personal 
credibility to sustain the co-operation of senior 
nvmagementrwill also be essential 

Applicants should have a good academic record 
with experience of the financial services sector 
preferably In banking. An attractive remuneration 
lockage is offered which w£U reflect the individual's 
ability to make an immediate contribution. 

■ TTK^totmstedehoukiaiH^tewriting^andln 
confidence, to;- 

Peter Llewellyn 
Personnel Manager 

Standard Chartered Merchant Bank Limited 
33-06 Gracechurch Street 
London EC3V0AX 

Standard & Chartered 

Standard Chartered Merchant Bank Limited 



Financial Times Thursday May 21 1987 



t l\'0 



£43 per single 

column centimetre 

. Premium positions 
will be charged £52 
per single column 
centimetre • 

For further 
information, call: 

01-248 8000 

Daniel Berry 
Ex t 3456 

David Rhodes 

Ext 4676 

Tessa Taylor 
Ext 3351 



£ negotiable + benefits 

One of the world's most successful Financial Services Groups seeks to recruit a young 
ambitious Management Accountant ftjr its Corporate Head Office based in the Gty. 

Working within a close-knit team and reporting (Erectly to the Group Financial Controller you 
will be responsible for: 

□ Development of PC based financial analysis 

Q Mainframe based systems review and enhancement 

□ Budgeting analysis and Group WnanHai repeating 

□ Ad hoc projects and investigations 

This role offers excellent experience and career prospects for a newly/recently qualified 
accountant (ACA, C3MA, ACCA) aged between 23-27. Well developed inter-personal skills are 
vital as this role will cany a significant amount of exposure at senior management levels. In 
addition, previous exposure to current group reporting standards together with tax 
compliance and planning techniques is desirable. 

The company offers a highly competitive salary which is negotiable according to age and 

experience together with an outstanding benefits package. 

Interested applicants should contact Phillip Price ACA on 01-4884114 
or write to him quoting ref. 6919 enclosing a full curriculum vitae at 
Mervyn Hughes International, 63 Mansell Street, London El 8AN. 

Chief Internal 

q£ 30,000 + Car 
& Financial Sector Benefits 

South Coast 

This client is a substantial UK financial services group with a record of 
sustained expansion which has been achieved by successful product definition, 
strong marketing and national coverage through a network of branches. 

The Chief Internal Auditor is a key senior management role which 
requires good organisational and management skills together with the ability 
to provide top management with sound advice and the knowledge and 
judgement to decide when to seek external assistance. 

Applicants should be qualified accountants, aged 32-40, with 
considerable experience of externa I, internal and DP audit plus sound business 
acumen and the ability ta communicate at all levels. 

There is a comprehensive remuneration package including relocation 
assistance where necessary. 

Please apply in confidence quat ing ret L 234 to: 

nt Financial Planning I 

if l i scott Manager 

Brian H Mason. 

Mason & Nurse Associates, 
I Lancaster Place, 


London WC2E 7EB. 

Tel: 01-2407805 


& Nurse 

i Selection & Search 


Surrey/Sussex Borders FMCG Company £20*25,000 + Car 

Scott, a US co m pany operating in over 60 countries, is die make a significant impact together with excellent prospects for 
world’s leading manufacturer and marketer of tissue paper rapid advancement. 


die UK com; 

’ in 1986, the UK and European 
jmamic and phase of da 

Reorganisation of the finance function, based at the East 
Qrmtfgad head office, has created a position involving: 
supervision of a small, high calibre team, with responsibiliti 
for corporate strategic punning, competitive analysis, 
decision supp o r t and control with a wide variety of 
commercially orientated ad hoc pr oj ects. This high profile 
sole interfaces ac Director level and will invoke 
extensive contact with Turn-financial managam^nr, 
in particular die manufacturing and distribution 
functions. The position offers an oppo rt un ity to 

r i 

skills are essential together with die drive, enthusiasm and 
ambition ta respond to the challenge offered by this newly 
created post. A first class salary package will include exec u ti v e 
car, senior management benefits and a generous relocation 
package where appropriate. 

Foe farther information contact Chris Sale on 01*831 2000 
(evenings and weekends 01-622 5321) or write to hiw\ at 
Michael Page Partnership, 

Soctfaem Home Counties Divis io n. 

39-41 Parker Street, London WC2B5UEL. 
quoting ref: LS473. 


South Coast Major architectural practice 

Michael Ihge Rutnershqj 

International Recruitment Consultants 

London Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 


This fast growing practice has now readied the 
stage of needing a young qualified ACA to 
join die senior management team and 
contribute to the con tmuing development of 
the business, for which a USM dotation is 
envisaged in 1983. 

The emphasis wiH focus an the enhancement 
of computerised systems and innovative 
management accounting in a dynamic, fee 
based organisation The person appointed will 
control and manage an established function ' 
which supports several offices. Further growth 
is actively bring planned 

Candidates must have good systems 
experience and be used to working in a 
professional service environment. Particular 
experience in a service organisation related to 
the construction world would be useful. 

Salary wifi not be a limiting factor as the 
partners seek someone who will share with 
diem in the continued profitable growth of the 
practice. A car and other benefits are provided 
phis relocation assistance, if necessary. 

Please send career details, including current 
salary and quoting reference 5592/Lto 
Mike Smith. 

“Aspirations to General Management? 9 


£20-24,000 + fully expensed car 
t senior management bemns 

Out client, a major household name in the retail/rentalbusiiiess, part afabhxe chip PIC, has anraviabla 
record of innovation, growth and profitability. A progressive policy of decentralisation has created 
three new positions for Financial Managers within operating divisions in the North East/Yorkshire, 
Lancasbire/Merseyside and North West London areas, each with sales income between £15in and 

£30m per annum. 

TTiftTO broadly based Boniarrolas are required to provide the backbone of a newfinancial management 
«nd repo rti ng structure. Early progression, to General Management is envisaged for high performers. 
The Number One financial position in a highly autonomous division, this role acts asa direct support 
to Q»n««nl providing an overall nna^nlmanagwnamservlca.AswBllasrimnlnganaccopiits 

function (10-15staff) and overseeing finunrial r eporting and debt management, the role embraces tha 
development end implementation of company objectives and strategies, forecasting, budgeting end' 
busines s planning - As the divisions are newly created, the Financial Managers will have considerable 
scope to develop a strong and effective finance structure. 

Candidates should be graduate qualified accountants aged c.28-35. Specific experie nce is less impor* 
taTit than rfimTnpTr nnl the ability toco mimmic a te effectively, and a record of positive career pro- 


Peat Marwick McLintock 

Executive Selection and Search 

9 Creed Lane, London EC4V 5BR 


t r\\\l ! 'I K! < kll ! MINI Nl'M l \ i IMS 

luMIOV I ! I R M l \f 1 1 ( \ MV,'!M)SI)k V, VM HI Ml r: VI U '.HKK ' II III It ( I I IIS \\i IK'.DU II »i 

’foung qualified graduate accountants 
From £25,000 + excellent career prospects 

How much financial acumen 

When that tin of car food happens to >he the _ 
country’s single Wggest-eeflmg groexsy productqmiB 
a consiaerabte amount ■ • . _ 

It takes the collective finanori expertise ot some 
Yprybriphthrama indeed to contribute to the running 
of a highly successful, £400+ million business based 
on the most advanced technology in its industry. . 

WearcPedferee Petfoods, a major company . 
wiriun the Mars Group.. The sorting salary shows that 
we're serious about attracting real talent roar best 
guide to career prospects is mat wWoiflver Mars unit 
you Visit, anywhere in the world, yon are Kkety to find 
senior managers who initially joined Pedigree 
Petfoods. . . 

Now, following an internal development move, 
we are looking for ambitious qualified accountants 
(ACA/ACCA/ACMA) with the potential to make a 
significant impact on our business future, 

We are not jusrlooJdng for foedriist 

accountants to fill particular jobs. We want to hear 

from accounta n ts with a flexible attitude to their 
development who trill actively seek a range of 

d i fferent chfllUmgex as their careers progress. 

Are yon good enough to take oh these . 

challenges? Are yon one of the high-achieving 
accountants who can meetour demands? 

assistance with relocation to the attractive rural East 
Midlands near Melton Mowbray if appropria te. 

To obtain more detailed information, ring 
0533 551282 ext 243 (manned 24 hours a day). 

Do not send a cv at this stage. 

1 Ap plications are invited! equally from women 
and men. 





The Hall-Mark Register for accountants has made a 
considerable impact on the accountancy recruitment 


Employers appreciate the concise and accurate 
method of putting forward suitable ca n didates. 
Accountants, the fact that one short career profile can 
gain them access co not just one company but many and 
can put them directiy on the shortlist for some of the 
most sought after jobs in the UK -where salaries are up 
to £35.000. 

For those accountants too busy doing a good job to 
spend time finding a better one, Hall-Mark is the answer. 

Even if you ate registered with other agencies 
registering with us will increase your chances without 
increasing the effort. 

Send today for the Hall-Mark Profile and 
be on-line for some of today's most exciting 


Financial controller 

Southern England, c £30, 000-car 

This is the engineering subsidiary of a major international group and Is engaged in 
the design, manufacturing and construction of spedaTist plant throughout the world 
as well as far the manufacture of a variety of component parts. The turnover of this 
company is around £25m and It employs about 500 people, of whom over 200 are 
highly qualified engineers. 

it new seeks a Financial Controller to take charge of the engineering accounting 
function. In addition to normal financial and management accounts a key area will 
tie contract accounting for worldwide operations which also necessitate International 
financing and contact with ECGD. Reporting to the Financial Director; this is seen as 
a key appointment with very consicterabte prospects for the future within the company 
or within the overall Group, 

The ideal candidate Is likely to be aged around 35, a qualified accountant with 

experience In the construction, engineering or fabrication industry Complete familiarity 

with contract accounting and excellent knowledge of ECGD and similar procedures, 
along with a good working knowledge of computers, both in accounting and contract 
control, are essential International experience is highly desirable. The personal 
qualities necessary to move hi alongside a highly experienced team of managers, 
as weii as the ability to build up and train the financial team, are vitaL 

The excellent offices are located In a very pleasant part of Southern England with 
good access to London and the Coast and outstanding schools and other facilities, 
'farms and conditions of service as pari of a major group are extremely attractive 
and include a beneficial share option scheme, fully expensed car, contributory 
pension and favourable assistance with relocation where this is appropriate. 

Please apply in confidence with brief CV to Gregory T M Hinds, Ref. GH675. 





Coopers &Lybrand 
Executive Selection Limited 

Shelley House 3 Noble Street 
London EC2V7DQ 

Planning and Control 


London base 

to £27,500 + car 

This is a newly created position indie tourism division of a msjOTmternattonal group. The 
company is a market leader in its specialist field and has ambitious plans for expansion in this 
fast growing sector. 

Working closely with the Finance Director and other senior executives, your role will 
encompass all aspects of planning and control. The initial emphasis will be on upgrading 
financial and management information, and thereafter you win provide a continuous analytical 
and critical assessment of the plans, budgets and performance of the opera tin g subsidiaries. 

You will also be involved in a variety of ‘ad hoc' projects and in acquisition studies. There will 
be frequent overseas travel to Africa and the Pacific. 

Probably around 30 you will be a qualified accountant with a strong trade record in the 
profession, in consultancy or in commerce. An outward going personality is essential together 
with the energy, ability and imagination to make a major contribution to the profitable growth 
of the bus i ness. The opp o rtunities fur career and salary progression are excellent. 

Please write in confidence to John Cameron, quoting ref. C 795, at 84/85 Grays Inn Road, 
London WC1X8AE (telephone 01-404 5971}. 


Consultancy • Search - Selection 


Internal Auditor 

£23.051 to£26,216pA inc. 

vSTSoaSo develop and promo** **«!«•» 

fr rj <' i' j [ 1 t} A Wfr 

of the Electricity Supply MdUOTV* PeniWn SchWW. 
Ilbu should hjnio* good 

of a cc oun ta nc y and u— of computer fapaw^ 

Please write in confidence swing Mdia fedrjgHk 
evoer to data and present salary Quoting Ref- 2w FT to. 

D. J. Vfetob, Recruitment Officer. 

The Electricity CooncS. 

30 MStbenk. London SW1P *RD. 

fe'j i 1 '4 |gS g 3g gg 


E43 par ting la column emtimatra. 
Premium positions will ba chsrpsd 
£52 psr singls column csntimurs. 
For furthar Information, call: 
Osnisl Berry 248 47B2 


'Child abuse - Help us protect them’ 

ictcHMiOT Bantam end ttwcoraaqwnt need to raflm and de«*3pta*iMreedM»we”C^^ 

emhftsftidoc S lwdiB M u wi . 

Rmbatfyrged in jar Isis wsrajos or sedytUse, youehaJd hm 

ial Controller I 

m A ■ si . * 

St. Albans, Herts £22-24,000 + car + benefits 

Our client is a £150m turnover manufacturing 
group and is the largest of its land in the UK. It 
already has some of the most sophisticated 
production processes in Europe at a number of 
manufacturing locations, and is now committed to 
continued investment to enhance future profit 
growth potential. 

An outstanding opportunity has now arisen to join 
the Senior Management T eam as Financial 
Controller, based at the Head Office, with 
responsibility for:— 

* Preparation of statutory, financial and 
management reports. 

k Development of sophisticated EDP based 

financial and product costing systems. 

★ Financial planning, budgeting and forecasting. 

★ .Cash management and controL 

Applicants should be qualified accountants, aged 
28+ and should be able to demonstrate a successful 
track record at senior management level ideally 
within a manufacturing environment. Prospects are 

Interested applicants should contact John Zafhr on 
0727 65813 or write to him enclosing a CV quoting 
ref: HCN 1006 at Centurion House, 

136/142 London Road, 

St. Albans ALl ISA. 

MhiiaelRagelWtiiership 1 

; -International Recruitment Consultants M 

London Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide | 

n mm t . . ' Amember of AddismCormdtoricy Group PL£ jtmmmmmmMk 

Finance Director “I 



«*chafcng^fawof«ww^indomw^ ^iap«nd^*iua»xjw«r 
«woyania.shfa pcM icataanw«ip«fciiefrtacpiwitaw*wa tt ai^^ 

Sod«y*B mm lo ptohc»eh|on«i 

Maly, reporting » toe Hud « Finance but Matos ctoerfr toe ChMCw* 

Division your (WiwponaM*aawi* be to ctovelap found btfJgaeng and 

flnanoU nar»jan»nlWbmwtfon system* tor nonflrane*#! mmwaor*.Ww 
wS wo* wto buds* hoklerenantaysM and mpiato Brenda! K*fmaBonw«fe« 

vrtg^lr rt 3 rt»toflBfldancylhwofoooM aatf to 9 oepd|»pAio«>q apaBa ls 

ha toaenicMepec to fttt of medMaton youwS 1 m toi luuw — nlrt i c Bn 
Pranca and a y Werr w rotated maaBrep'Pductag and p i aeincing repent to toe 
management Mon and budget inm maaftige. 

*binow!lv«-iBe you- aaa&ty to develop idea and 

Why the NSPCC? JSSS&t+mm****- 

Banoffis for you and your .SESEK5e*foe-e-- 

careBn approach to produce real results. 

* £i7^oo-eia,ooo 
-* Society car 

* MooeonMMNy Pension 

-X- 22 days annual toevept M sX i M uta ydey 

issndCV to strict contklsnoe to: FueownsID iaihi is i AHSPCC. 87 SaflronHBl London EC1N8RS. 

77m NSPCCh an Equal Opportunity fiqptywr 


£40,000 + car + incentives 

Our client, a financial services subsidiary of a major ‘City* 
institution, is looking to recruit a Finance Director; The 
parent company has ambitious plans for the rapid growth 
of the subsidiary through acquisition over die next few 

The individual sought will work closely with the 
Managing Director in developing the business and will be 
expected to assume the leading role in all financial aspects 
of this development. They will play an important part in 
the acquisitions and in their effective integration. 

As the company builds towards. its planned size, the role 
will become more orientated towards financial 
management. An important element of the 
position will be the development of management 

information systems and previous experience in tins area 
would be important. 

You will be aged 32*40 and a Chartered Accountant, with 
recent experience in a similar position. However, a 
senior manager with a "big 8” firm and a financial sector 
bias, would also be considered. The most essential 
attributes are, a strong commercial approach, a well 
developed business acumen and excellent inter-personal ' 

Interested candidates who meet these demanding 
requirements should write, enclosing a comprehensive C.V. 
and daytime telephone number quoting ref. 411 to 
Philip Rice MA, ACMA, Executive Division, 
39-41 Parker Streep London WC2B 5LEL 

Michael Fbge Partnership 

International Recruitment Consultants 

London Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 
aggros A member of Addison Consultancy Group PLC jmau 

3 Lai. A 

Idwide I 

Financial Director 

Sc £35, 


£35,000+ car & benefits" 

Our client, a dynamic pic, engaged 
to the manufacture and wholesaling 
of consumer durables wish to 
strengthen their executive team. 
Reporting to the group chairman 
and managing cfirectorthe appointee 
wiH direct the finance function and 
contribute to strategic planning. 

Prime responsibilities will include 
business planning, budgetary 
control, financial and management 

accounttog, treasury management 
arid the development of information 

Remuneration will be negotiable 
and benefits will include executive 
car, B-UR^ contributory pension 
scheme and if appropriate* 
relocation assistance. 

Chartered Accountants, ideally 
aged 30 to 40 who can demonstrate 
a significant contribution to 

corporate growth are invited to 
forward a written application, 
quoting MCS 207 enclosing 
curriculum vitae and current 
remuneration details to 
Oliver Overstall at 
Price Waterhouse 
Management Consultants, 
Executive Selection Division, 
>tirk House, York Street, 
Manchester M2 4WS. 

Price Waterhouse 41 



c £18,000 + Car + Benefits 


for marketing-minded CA 

London c. £20,000 + car 

Clark Whitehili is a leading national firm of Chartered Accountants and business 
advisors with offices and associates throughout the country. Clark Whitehili 
Associates is the central organisation which provides technical, administrative and 
marketing services to member firms. 

We are recruiting for the new position of Executive Officer which carries 
responsibility for developing the Association's advisory functions. In particular, the 
Executive Officer will be concerned with up-grading quality standards, creating 
technical programmes and identifying new business opportunities for member 

The Executive Officer will be responsible to the Chairman of Clark Whitehili 
Associates and, as coordinator of the regional committees, will be a regular visitor 
to all the UK firms. 

The successful candidate will be a Chartered Accountant aged 26-32, whose 
training has included business services for smaller clients and who possesses a 
blend of organisational, technical and marketing skills. Personal qualities mil 
include an ability to grasp quickly technical developments and the strength of 
personality to organise ana control business meetings. 

Write initially with a C.V. to J H F Gemmeli (quoting ref. F7111) 
Clark Whitehili Associates ^ 

25 New Street Square, LONDON EC4A 3LN 

D£|] Clark Whitehili 

Corporate Planner/ 
Business Development 

City : c.£30,000 

Our client, a prominent and successful financial services pic. seeks 
to expand its management team by the recruitment of an executive, 
responsible for corporate planning within dynamic strategic 

The successful candidate is likely to be a graduate/accountant/ 
MBA with experience in financial analysis, development of 
corporate strategies and acquisitions. 

The appointment wiH cany the fringe benefits normally expected at 
this level and will include the provision of a car, mortgage subsidy, 
profit share etc. 

Please write with full details. These will be forwarded direct to our 
client. List separately any companies to whom your application 
should not be sent. John Welsh ref. JSW/B/3. 

MSL Advertising, 

52 Grosvenor Gardens. London SWI W 0AW. 

Offkn in Eunvr. me ArnnKu!. Auuniljua ani Aim Patifo 

C i * 

^«.vTV .,a 

L Advertising 

Through sheer Innovation and creativity, our client 

has revolutionised Interior office design within a highly 
oompeti ti ve rnarket, and has developed an exclusive 
international client base. 

worwngctosely with the Financial ControlleK you 

wtUneed a strong cost Accounting background 
gained within Manufacturing or 
Dlsmbutlon). and fully appreciate ihe role of 
sophisticated exp. systems, the development and 
malmenanceof which will be your major priority. 

while an IGMA qualification would be an advantage 
our client is more concerned with driv^mhuslS™£d 
oommiiment. Rarely will you be given thech^SS 

or , ' anctesu< * levels of 

"^"-derails call Mary Ann Shuldham on 


“SSSS 1 ssissasa 

S iamfS 1 f0r th ° function inti running » «£JJrXUJ 
The work will b« varied and includes further devekutmenr 

I 30 “WW tired in^emSTt SfSSSetiSj 
aSS'JSr*** monicorln * of “■*» How, budcHtTmdU 

lis u feS”* p £ rXQ , n w “' bl » * BUMiveted qualified Accountant 
and likely to bq In their mid JOs, Previous experience within ■ 
similar professional firm or company In the construction nr 
engineering Industry would be wefuPbITt not ewentUL ^ 

In recognition of the importance of this position B ^ ■rrr.rriw- 

S7£&2" B pUo " 

P/eose write giv/ng full career rfetaffe. age a ad quaUfhxtlont, to; 

Box A0S2B, Financial Times 
W Cannon Street. London EC4P 4&Y 


Financial Times Thursday May 21 1987 


Finance Director 


c£30,000 + Car 

Our client, a well established financial institution 
specialising in the areas of hire-purchase and leasing is 
seeking to recruit a Fmanrial Director Designate forics 
Head Office at Crawley. 

The Company have an eatp aralfng hraiyfi 
throughout die South of England, They have an enviable 
growth record over die past five years and are looking for a 
commercially astute and technically above average. 
Chartered Accountant to work closely with the 
Manag ing Director rn Ae tnyna jlMwgnt of the 

Responsibilities include the managemen t of ?-P 

staff in providing monthly management accounts, 
statutory a c c o u nts , tax planning, budgets and in further 
dewlnping mana gement information systems. 

The successful applicant will probably be in their early 
thirties with a confident manner, strong management 
experience and a high standard of computer literacy. 

Interested candidates who meet these requirements 
should write to Philip Rice MA, ACMA, Executive 
Division, enclosing a comprehensive C.V. and 
daytime telephone number quoting ref: 405 at 
39*41 Parker Street, London WG2B5LH* 


Michael Page Partnership 

International Recruitment Consultants 

London Windsor Bristol St Albans Bi r min gham Nottingham Manchester Leeds Glasgow & Worldwide 
bbbb A member of Addison Consultancy Group PJJ2 jammm 

Group Financial Controller 


c. £ 3 5 , 000 plus carSd benefits 

Our diem, the subsidiary of a major, diversified British pic, 
man ufactures specialist components for the automotive, agricultural, 
defence and allied industries. Located in custom-built modem 
premises in Kent, the Company also manufactures aod refurbishes 
machine tools and spares through its Coventry based subsidiaries. 
With turnover approaching &30M and a highly impressive customer 
base, further expansion is phoned. 

Reporting to the Managing Director, you will form an integral part 
of the Group's Management Team aod contribute significantly to 
Board level decisions. You will assume responsibility for the finance 
function, which indudes the data processing department, and be 
expected to. enhance the Group's decision making process by 
improving tngpflgfpimt information. 

You will be a qualified accountant, preferably Chartered, aged 35-45, 
with substantial manufacturing experience. Particular knowledge of 

stock control techniques, standard costing and systems development 
is essential. You will have a strong personality complemented by 
drive, determination and seif confidence. 

The attractive remuneration package indudes a fully expensed car, 
and relocation expenses will be provided If appropriate. 

Please reply to Basil Miller, in confidence, quoting reference 1758. TT 
on both envelope and letter. 

Haskins Sells 


P.O.Box 198, HilJgateHouse,260ld Bailey, London EC4M7PL. 



c. £18,000 

+ bonus, car and other benefits' 

The Company 

A long-established private company with a Cfflm 
turnover from a chain of retail shops in Southern. 
England The company is expanding froma strong 
asset-base and offers a challenging careen 

The Job 

The Controll er will contribute to the company^ 
growth and profitability by exercising strict financial 
management throughout the organisation; and will 
have particular responsdnlity for budgets, accounting 
(and interpretation of results), treasury; internal audit; 
control and the operation and development of 
computer systems, to link with coasting EPOS in all 


Qualified accountants, preferably in their 30h, with 
cbmmtrdal experience; ideally in the retail sector and 
fanjiliarwith computerised systems. Personal qualities 
sought include the ability to think creative^ capacity 
fbrleadersbipand team work and a commitment to the 
■ •. practice of Christian ethics in business. Applicants of 
any racial groups mayapply 

Please apply to: Sir Timothy Hoar** Career Plan Ltd, 
Chfchcsccr House, C hi chester Rents, Chancery Lane; 

London WC2A 1EG Teh flE-242 57 75 : 

A 'v.'- 


. -,rw 



£20K+ Car + Substantial Benefits JT 

Micro Peripherals Ltd. la one of the TJ-ICs most m 
successful independent importers and distributors B 
of micro-computer printers and ancillary products. B 
In line with our continued expansion strategy, a B 
position now exists for a highly-professional and ■ 
experienced Fin an dal Controller, to be based at B 
our northern office In semi-rural Lancashire^ ■ 

At the present time we are a mediu m-sir en B 
company, however, we do not intend to remain B 
static and are consequently actively seeking an je 
ambitious individual who requires real 30 b 
satisfaction and. who intends to seize opportunities 
tor self and company progression within our 
fast-mortng market place. 

This position would ideally smt an energetic. *r 
self -motivated and enterprising chartered B 

accountant who is not only capable erf demon- B 

strating a detailed final) rial accounting knowledge m 
but has the flair and determination » realise the ^ 
enormous potential that this position offers for B 
the truly career-minded professional. Ill 

The work is challenging and varied and Includes B 
tiie preparation of detailed schedules for yea«»d ■ 
work and the control of the year-end audit, as B 
well as responsibility for the day-to-day control of ■ 
all financial data processed through war computer. B 

which combines a fully-integrated stock control ^ 

and nominal ledger. . In 

Our company is achievement motivated and B 
although the work is demanding and exacting the B 
rewards and benefits are commensurate. FuU ■ 
details of the benefits and a complete work 
specification are available on request. Interviews 
trfUbe held in Kosseodale. Lancashire. 

Please telephone the tmderstoned now f ur a* *|g= 
informal dfaeusabm, or appUt strictest 

M/.L.uri.OTri® I 

jsrass 3 srs, w „ I 

1 G 3 RfelrUd 01 


a rabidly ex pan (Unfl YwtaWro-towa paWte’ company with tiRHiteaM 
owaraaai In terete* and turnover approaching CTBO milltar. appllea- 


SI aueeactful candidate will ai» bp «pol«»«t Group Company 

The peefttoa enswnpame not only full Rflenolal rMpOhBibffity tof *** 
trading opera tloee Which mcantly hWi .hid »* enviable profit growth, but 
olao proparaww of tto consoUdared group accounte and liwotvemant In 
Group corporate matter*. 

The aucemahd candidate it lAaty to to a Chwtepld Accountant and IMVM 
alto »n«t e positive personality with an alwt end Ihraly atyta or 
working. The poahJon «|k Involve working dosety whh the UK Managing 

piroctof end Group nn*ndal,Wreottr. 

Appilwntm* In etrW contoence, wRfr tuti CV should to 
w Box AB5SS. ftoMeial TUnn 
tO CeJfflffffl .Slreac, London EC4P 4BY 



As e result of our continuing success we ere shortly moving to purpose designed offices 
In London Bridge CRy and now have a number of opportunities tor Accountants* both 
qualified and pat qualfled to Join our smaH but established accounting teams. 


Ayoung ambftfcxs quafifled accountant or finalist with a good bade record Is required 
to manage our UKtSubskflaiy Company section. The responsbffities win include the 
preparation of monthly financial reports,, management and statutory accounts and the 
development of new and existing computer systems. 


A young quafifled accountant or flnaBstwith otperienoe of workfog in a mainstream financial 
reporting environment b required as the number ftwo in a small team. The key 
responSbflfties wffl Indude month end reporting and management accounting for our 
London matnsteam banidng unit 


penrMtoMntldewiyMitlfaqyewie post rywSfying^ypeflgngg^rwqi nm»rf trwvt- 
ordinate and consolidate annual ptans and quarterly forecast tor certain of our banidng 
< operations 61 London. The abffity to analyse and constructively report on variances is an. . 

* esentfaDquofityr ' 


Fix our Merchant Bank subskSary> a qurilfled accountant wfthS years reiabed 
experience Inciuc&ng production of accounts and Heed Office returns. 

If thinkyou have the necessary skffls and rdevant experience, with fcncMdedge of PC 

modeling techniques parhculorty LOTUS 1-2-3 and are wHBng to mice a commitment to our 
growth and success you win find we are able to olfcr a highly competitive and attractive 
remuneration package In an envfronment wWchwIH revwrd indmdual performance and 

To apply write enclosing your fid CV. and stating which position interests you to 
Kay Pierce, Personnel Officer, Canadian Imperial Bank of Commerce Cottons Centre, Gottons 
tom* London SET SQL 


If you’ve outgrown your 
present company 

we can accommodate 

tTAIII* management accounting informationv 

yUUl strict coritrols.^ \bu will take fuBrespons 

w . for yoiff innovation^ 

and motivats a young accounting tearr 

€1 1 n II 1 corrptementingther 

■ profesaonafism. 

-rDGuciUo financial accountant with prewen syster 

London. ab%andpracticalawarenessafbusin 

realities. may comefiom the profes 

Recent reorganisation wither BTs via industry andyoute new readytopu 

International Products Divison has given tatents you've accunuiated fully to the 

rise to this oa^^opportur%Mouirs Knowlalae of statutory accountingin 

into a new environment, International overseas territories would be an advart 

telecomms products and systems across 
the workt Part of this strategy has beeo the 
estefishment of operations overseas. 

- This organisation hastremendous 

potential and is able to offer this 
opportunity to an anbitious Financial 
sedsabitader platform, big^r prospects 
and intemalionai scope. 

Vte're footing for someone with 
irttiative of developing our recently 
installed mini computer based accounting 
^stemtoitsfUlpotentfalinoiderto •' 

management accounting information with 
strict controls. ^ fou will take fuH responsfoBity 
for iDLR- inrwvafions, win lead by example 
and motivate a young account^ team 
complementing their training with your 

\buwfllneedto be a fiJfiy experienced 
financial accountant with prcwen systems 
abflfty and practical awareness of business 
realties Yju may come fiom the profession 
via industry aid you're now ready to put the 
talents youVe accunuiated fully to the test 
Knowledge of statutory accounting bt 
overseas territories would be an advantage. 

The starting package indtides a salary 
in the region of £23K, a bonus opportunity 

and other large company benefits. Future 
career development prospects are ejedtent 
If you feel your career needs more 
scope, please phone or write with cv to: 
Fiona Robinson, Personnel Manager, 
British Telecom International Operations, 
Room 419, 12-15 Finsbury Circus, 

London EC2M 7Df?Tet 01*588 2278. 
Fiease quote ref: FT 25. 



Brtfcfi Telecom is an equal opportunities employer. 


Executive Search and Selection Consultants 


Corporate Controller 

For Two US Divisions ofSiebe Ptc 
Windsor Based, c £27,500, Car, Benefits 

This position offers an opportunity to Join the small, close-knit team at the 
centre of one of Britain's most ambitious and progressive industrial groups. 
Siebe’s international expansion has been spectacular in the last few years and 
more than half of the £1000 million plus turnover now comes from overseas 
operations. The person appointed to this new post will be responsible for 
assisting in the control ot two recent US acquisitions, with combined soles in 
excess of $7 5 Dm. The role involves ensuring that group reporting requirements 
are met; analysing and interpreting results; recommending action to optimise 
performance; monitoring the implementation of agreed business plans. Success 
will depend upon building a close, positive relationship with the management 
teams in operating companies and providing an effective link between them 
and corporate headquarters. Candidates, who are graduates (preferably in 
science or engineering) in their late 20 a s-early 30's, must be qualified 
accountants with senior level experience of financial analysis and business 

control in a substantial group. A thorough understanding of manufacturing 
industry is essential ana an appreciation of American accounting practices 
would be useful. Frequent travel to the USA will be required. Career prospects 
are excellent 

S.P. Spindler, Hoggett Bowers pic, George V Place, 4 Thame a Avenue, 
WINDSOR, SL4 1QP. 0753 850851. Ref: W11011/FI 

Group Management Accountant 

Northern Home Counties, To £25,000, Car, Benefits 

This is a senior appointment, working in the nerve centre of a well known UK 
Engineering Group, which has a turnover approaching £150m per annum and 
further exciting plans for growth, both organically- and through acquisitions. 
You will be a member of a small team, working in day to day contact with the 
Group Financial Director. Ideally aged early thirties and qualified, you will not 
only be an excellent technical accountant but have first class skills in the 
interpretation and control of financial data and information which are key to 
tire performance of the business. In addition you must have a high level of - 
knowledge in computer based financial systems, since the group is making 
rapid strides in this area. On a personal front, you will be an ambitions 

individual, wishing to progress further, with an outgoing personality and 
ability to relate wall with others throughout the divisions in the group. 

J~A. Thames, Hoggett Bowers pic, 7 Lisbon Square, 

LEEDS, LSI 4LZ, 0532 448681. Ref: L13019/FT 

Head of Finance 
& Administration 

Laxary Retail 

London, West End, . Package c £19,500, Benefits 

This malar international retailer of top brand name/designer merchandise and 
hig h quality software requires a qualified accountant to join Us European Head 
Office, which Is also responsible for subsidiary interior design and restaurant 

I ¥ ' ' ' *i *J l - *• 

administration and broad involvement in the day to day running 
business. The development of additional European outlets and possible sew 
acquisitions will lead to increased responsibilities in the near future and the 
possibility of some European travel. Candidates in preferably the higher cud of 
the 27-45 age range should be able to demonstrate good commercial 
accounting experience Including staff management and computer literacy. The 
competitive salary/bonus package is enhanced by attractive benefits and the 
potential to develop the role to a key position in the company. 

S.J. A. Nicholson, Hoggett Bowers pic, 1/2 Hanover Street, 

LONDON, W1R 9WB, 81-734 6852. Ref: HlBOOl/FT 

Assistant Treasurer 

Retailing Group 
Hertfordshire, c £17,000, Car 

This is an excellent opportunity to develop your career with one of the largest 
and most respected groups operating within the highly competitive retail 
sector. Currently implementing a heavy investment programme the Group has 
a major retail influence with sales in excess of £2 billion. A new central team 
is being created to be based to the North of London which will include a 
reorganised and dynamic treasury section. A candidate of high calibre and 
potential Is required to assist (he Group Treasurer. This demanding new 
position will have responsibility for the day to day management of money 
market transactions as well as close liaison with trading divisions. Applicants 
aged 21-40, preferably qualified, possessing good communicative skills, 
numeracy and resilience should have at least three years' commercial 
experience In a high pressure environment with exposure to treasury 

D. Evans. Hoggett Bowers pic, 1/2 Hanover Street, 

LONDON, W1R 9WB, 01-734 6552. Ref: Hi 9208/FT 

These p osi ti o ns are open to mala or tamale candidates. Fiease telephone for a Personal 
History Farm to the relevant office, quoting the appropriate reference. 

Qualified Accountants 

UP TO. £24,000 

Our client is the UK 
operation of a maior US 
based Multi-National, with 
subsidiaries in Europe, Far 
East Africa and 
Scandinavia. Due to 
internal promotion, the 
London Head Office 
Internal Audit Department 
is currently seeking two 
ambitious and enthusiastic 
accountants, preferably 
with a good command of 
an European language. 

The Internal Audit Depart- 
ment is traditionally 
regarded as e route 
through which career 
conscious young 
accountants are able to 
gain uniquely wide 
experience and make the 
transition to senior 
financial management at 
home or abroad. The 
department is weif 
established and 
enlightened in outlook. 
Ref: JR/SOI 

professional in operation 
and highly regarded for 
the contribution it makes 
to the success of the 
company. The work 
indudes ad hoc assignments 
and investigations as wed 
as operational, manage- 
ment and systems audit. 

Excellent remuneration 
and career structured 
benefits package. 

For further details phone or ACCOUNTANCY ASSOCIATES LIMITED 

wma quoting reference m , temp, /perm, recruitment consultants 

5 VIGO STREET LONDON W1X 1AH TEL.0 1-439 3387/8/9 





£30,000 package 

Synonymous with quality satellite television 
systems MEGASAX has consistently doubled its 
turnover every year since its inception in 7981. 
MEGASAT as a company is dedicated to 
quality professionalism and excellence and 
demands all these of their Finance Director 

Reporting to the Managing Director the 
successful candidate will assume full 
' responsibility for the finance function 
including raising capital for new ventures/ 
special assignments and joint venture projects. 
He will also play a key role in the business 
development of the company. 

Interested applicants qualified and under 35 
will be determined and creative selfstarters 
with good business acumen coupled with the 
ability to motivate/ iead and inspire confidence. 

Apply in confidence with a written curriculum 
vitae to Jon Vonk or Michael Herst, or 
telephone 01-629 4463 (evenings 01-674 8643). 






to £25,000 + CAR + BUPA 

We are a long-established and highly-successful 
Road Haulage Company based just north of 

We have rapidly expanded over recent years, 
with t/o reaching £4m and are budgeted for 
further rapid growth. We have an excellent 
opportunity for a first-class financial accountant 
to assist in our development. 

The successful applicant will be expected to 
contribute significantly to business planning 
and the overall commercial management of the 
business. The initial emphasis will be on the 
rapid development of the company’s manage- 
ment information system as well as being 
responsible for the finance and data-processing 

information. Long-term career prospects are 

Candidates, aged 28-40, should be qualified 
accountants (CACA, CIMA, AGA) of graduate 
intellect who can demonstrate successful 
achievements to date. 

Interested applicants should write with full c.v. 
including daytime telephone number to: 

The Managing Director, 

Rhys Davies and Sons Limited, 

Moy Road Industrial Estate, 

Taffs Well, 

Nr Cardiff, CF4 7QA 

Financial Times Thursday May £1 1987 

;• •• '**»-*# 

. .. .. 

North Sea Sun Oil Co Ltd is a principal subsidiary of die 
Sun Co Inc, currently engaged in oil and gas exploration 
and production both onshore and offshore in the UK. 
Further to its inception in 1964, North Sea Sun Oil Led 
now has an interest in 1? blocks, and is operating eight of 

A carefully considered programme of exploration appraisal 
and development activity, supplemented by participation 
in future licensing rounds and selected acquisition is being 
pursued do ensure continued success. 

In line with this expansion a position has arisen within die 
Company’s International Exploration and Production 
Division for a Senior Accountant. Reporting to 
the Performance Analysis Manager, and liaising 
with Geoscience, Project Deve l op m ent and Dallas 

financial administration personnel respectively, thw k*Y 
position entails responsibility for the preparation of annual 
budgets, as well as the provision of advice to senior 

management regarding associated variances. 

This appointment involves die review of existing computer 
applications and reports produced and received by the 
Group together with participation in the development ot 
new systems and procedures. 

Candidates, ideally aged between 25 land 38. .ahouU rraew 
a formal accounting qualification (AGA, CALAerACMA). 
Intereste d applicants should contact Gerald Whiting on 
01-831 2000 or write to him, enclosing a 

comprehensive C.V. at Michael Page 
Partnership, 39-41 Parker Street, London 
WC2B 5LH quoting reference 2086. 

Michael ftge Partnership 

International Recruitment Consultants 

London Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 

A member of Addison Consultancy Group PLC _ 

Director of Finance 

Herts/Essex border c£25,000 + car + profit share 

Our client is a US subsidiary (T/O £10m) part of a multi-national organisation 
which manufactures and markets specialist products at the forefront oi 
technology for worldwide use. 

This key appointment will appeal to a graduate qualified accountant, aged 
30-35, with keen business acumen and proven commercial experience at 
senior level in a manufacturing environment. 

As part of a management team reporting to the Managing Director, he/she 
will assume overall dii ' ' * 

direction of the Company's financial activities including 
the continuous review of pricing proposals and updating of all computerised 
systems. In addition there will oe responsibility for the development of the 
strategic business plan for the UK and the investigation of new business 
opportunities in Europe. 

Candidates must demonstrate the personal qualities required to liaise 
effectively with North American and European colleagues and the technical 
and professional skills to contribute to the improved profitability of the 

Applications under ref RC236 to: — 

Miss Marion Williams, The McCann Consultancy, 

4 Bouverie Street, London EC4Y SAB. 



£43 per single 
column centimetre 
Premium positions 
will be charged £52 
per single column 
For further 
information, coll: 
01-248 80Q0 
Daniel Berry 
Ext 3456 
David Rhodes 
Ext 4676 
Tessa Tfeylor 
Ext 3351 

FINANCIAL controller 


c. £25,000 + car + benefits 

The Yasuda Fire & Marine Insurance Company of Europe Limited is die 
London based European subsidiary of the Yasuda Group of Co mpanie s — one of 
the leading non-life insurance groups in Japan with operations throughout the 

The Company is seeking a replacement for the current finance director who 
will be retiring in 1988. 

The candidate will be responsible for die Company’s financial functions and 
will play an essential part in achieving the Company’s ambitious future growth 
plans in Europe. 

Candidates, 27 to 40, should be qualified with a broad based accounting 
knowledge and an interest and aptitude in the development of computerised 
systems. Experience in a non-tariff insurance company, broker or Lloyd’s 
syndicate would be ideal - 

Self confidence, initiative and the ability to communicate and influence 
decision making is essential. Salary is negotiable at £25,000 with a fully expensed 
car and other fringe benefits. 

P/ease send brief career znd personal details, quoting reference F/067/ A, to 
Carrie Andrews at Ernst & Whinney Management Consultants, Becket House, 

1 Lambeth Palace Road, London, SE1 7EU. 

l aM Ernst &Whinney 

International Music Business 







WEA International Services Ltd prorides financial and administrative services to 
WEA International Inc. (a U.S.-based company) and its twenty-four affiliated 
subsidiary companies and numerous licensees. The affiliates and lice n sees conduct thrioc 
business in virtually every major country in the world excluding the U.S. 

The environment is characterised by the high natural pace of the record industry, the 
international nature of the activity and a highly developed finance system utilising the 
best of modem systems and communications technology. 

In this role you will be expected to provide a comprehensive financial service to 
WEA International Services Senior Management. This wifi focus particularly on areas 
such as financial reporting, consolidations, budget preparation, forecasting, interpreta- 
tion of results and a variety of ad hoc analyses and investigations. 

The requirement is for a qualified accountant in their late 20 T S or early 30’s with good 
communication skills and offering a high standard of computer literacy. Experience in a 
U.S. multi-national environment is desirable. 

My client offers a fully competitive range of employment conditions. Location- 
Central London. _ 

Applicants of either sex should apply in confidence to Michael Johnson on (0962) 
53319 (24-hour service) or write to Johnson Wilson. & Partners Ltd., Clarendon 
House, Hyde Street, Winchester, Hampshire S023 7DX quoting ref. 756. 

Johnson Wilson & Partners 

Management Recrui t m ent Conso K anta 


inance Director 



c £40,000 + car + share options 

Construction c£20K + profit share + car 

Our client is within the Construction Division of a major successful Group. Companies in 
the Division represent a wide spectrum of business areas in Construction and 
Maintenance. They are growing, profitable and have a combined turnover approaching 

Rc porting ro a Main Board Director of the parent Group, an excellent opportunity costs 
to work closely in a number of autonomous business areas, which are at different stages o. 
development, and assist die Directors with their business growth plans. 

We would therefore like to hear from mature, practical, qualified accountants; probably 
aged around 30, with grass toots experience of building/civil engineering/ 

Older candidates will be considered. Of paramount importance are the personal qualities 
to facilitate rapid switchingbetween different business areas, personalities, and levels of 
financial input. Career development prospects in the medium term are excellent. 

Please write in confidence to Pecer Willingham quoringreference LM883 enclosing your 

CV, current salary package and daytime telephone number, ar Spicer and Fegfer Associates, 

Executive Selection. Friary Court, 65 Crutcbed Friars, London EC3N 2NP. 


A£75 million turnover group engaged in the maricetiiig ami distribution of arange 
of high technology products seeks a financial executive of exceptional ability to 
strengthen its management team. This appointment is part of apl annwi CTpanswn 
programme which aims to achieve sales in excess of £200 million within two 

The Controller’s initial challenge will be to enhance financia l reporting and 
controls to meet the standards demanded by the group’s highly professional and 
commercial top management team. Thereafter the successful will 

progressively take on broader responsibilities in preparation for further career 

Applications are invited from qualified accountants or MBAs, aged md-3Q*s to 
circa 40, who possess proven people management skills, a quick min4 a resilient 
approach and a capacity for hard work. They should combine exposure to tight 
financi a l disciplines with experience in a medium sized operating company 
ideally in a distributive industry. * 

Spicer and Pegler Associates 

Executive Selection 


& Touche Ross 

The Business Partners 

Thavies Inn House, 3/4 Hdbara Circus, London EC1N 3HB. Tel: 01-353 7361. 





Our client is a rapidly growing professional 
association. Due to a reorganisation in the 
finance department, a financial accountant is 
required to lead and direct the accounting team. 
Reporting to the Financial Controller, the financial 
accountant will supervise the department and 
ensure that systems and procedures are in place 
in order to produce an accurate nominal iedger 
monthly from a computer based accounting sys- 
tem. Close liaison with the management accoun- 
tant and other departments will be needed. 
The successful candidate will be an ACA/ACCA 
with experience in problem solving In a high vol- 
ume accounts department. This job is not for a 
wilting flower and forthright determination, good 
communication skills and a hands-on approach 
are required. 

Career prospects are good. If you believe you are 
up to this challenge, send a concise CV with sal- 
ary history to Steve McBride. 


Chartered Accountants 

Management Consultancy Division 

1 86. Clly Rood London, ECIV2NU. 



We are a major financial institution with a small 
team devoted to investment in unquoted securities. 
The present portfolio consists of 68 UK invest- 
ments and 15 US investments. 1988 activity saw 

realisations from the unquoted portfolio of £2Sm 

and investment of over £l4m in 29 companies. 

.j° , th e . expansion we require another 
individual to join the team. 

It will be your responsibility to establish 

monitoring systems and work closely with the 

2SH2JE 1 ?* * * he tewn t0 ensure the 
continued effective monitoring of investments, it 

is anticipated that you will be absorbed into the 
mainstream unquoted investment activity within 
two or three years. 

ACWA^r^rMA 10 be ® recently-qualified ACA, 
211 individual who wishes a 
change in direction from your present career path 
m a financially-related activity. v 

SteSto?** With £UU CUrricuIuni ^tae and salary 

Box A0540 . Fin mi da l Times 
20 Cannon Street , London EC4P 4 BY 


hi f ui 

\i\ n 


Financial Times Thursday May 21 1987 


■■ h'. 


Merchant Bank 

to £35,000 + car + benefits 

Our client is a major merchaittbank with 
extensive international activities, and an 
outstanding reputation for offering a wide range 
of innovative financial services. 

A Chief Accountant is needed to manage a - 
young finance team responsible for all aspects of 
accounting, financial control, and compkny 
secretarial matters. 

The successful candidate must be a Chartered 
Accountant, aged 27-35, with, recent experience 
of the finance sector cmA m mjpummn 
two years experience outside of practice. 


This position will represent a significant 
challenge, to die right applicant with excellent 
career prospects throughout the group's 
worldwide operations. 

Interested applicants should write to 
Jon Anderson ACMA, 

Executive Division, 

enclosing a comprehensive CV and telephone 
number at 

, 39-41 Parker Street, 

London WC2B 5LH, 
quoting reference number 412. 

Michael Rige Rutnership 

International Recruitment Consultants 
London Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 
- Ameniber^AdcbsonCorisidprncyGknipPLC. 


I Finance Director I 

P W. Yorkshire c£22,000 + Car + Bonus I 

Our client, is an autonomous, engineering 
subsidiary of a highly acquisitive, rapidly 
ex pandin g, tnedtimn sized TUgPle. Thekproduct 
range has an enviable reputation in the UK and 
Overseas, which has resulted in the successful 
penetration of their market sector. 

They now seek to recruit a Financial Director who, 
rep or ting to the Managing Director, will be totally 
responsible for the accounting and data processing 
f unctions. In aAlfrirwi tn the normal finnnrial 
•responsibilities, die individual will be expected to 
make a significant input into die overall commercial 
management of die business, .as well as 
closely monitoring their Overseas interests. 

.Candidates, aged 30-40, will be qualified 
accountants* with a strong track record in 

itedD.P. systems, together with a hit 
degree of commercial awareness, managerial and 
communicative ability. Prospects within (he Group 
are excellent. 

Relocation facilities are av ailabl e where 
appropriate. Interested applicants should write to 
Stephen J.Broadhurst, quoting ref: L8336, at 
Michael Page Partnership, Leigh House, 

28-32 St. Paul’s Street, 

Leeds LSI 2PX. 

(Tel: 0532 450212). 

Michael Page Partnership 

Intonations! Recruitment Consultants 
Loudon Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 

AmemberqfAddisonConst ikancy Group P1S2 

- * * L 

: 5VIUI 


*. A* *. 

Ikt *- 

Management Auditor 

m major 

£20,699-£22M * 

j: ssv 

Bamardo^ is a Charity providing servi ces 
to young people and families with special 
needs and to do this we raise fonds from the 
public and government sources and maintain 
a range of support services including 
financial accounting, property management 
and publicity Ws are committed to achieving 
effectiveness and value for money in all these 

There are two main aspects to this _ 
appointment One is to assist Directors in the 
constant appraisal of the use of all resources 
to ensure maximum benefits including the 
use of management services techniques, The 
other is to monitor internal audit control 
systems to ensure that assets ate adequately 
protected, income properly accounted fin; 
and that payments axe property authorised. 

The vacancy arises from the death of the 
previous occupant, who had held the post 
since its inception in 1974. The role is 
therefore well established. However, there 
will, no doubt, be benefits to be gained from 
the fresh and different approach ofthenew 
leader; who will also be able to contribute to 
our forthcoming review of our computer 
Systems. This could lead to us settingup our 
own data processing facility 

The post reports to the Senior Director 
and is based at our headquarters. It calls for 
a candidate of degree level or equivalent 
with trainingand/or qualifications in either 
computer studies, m a n a g ement or business 
studies, accountancy or administration with 
wide ranging experience in accounting audit, 
computing' and management services. 

Samardob is a Christian Child Care 
organisation and offers a comprehensive 
package of conditions of service including 
relocation expenses and transferable 
pension. Applications ibrposts are 
welcomed from persons irrespective of 
disability marital status, sex or race. 

itarther details and application bum are 
available from Mr V H Givan, Personnel 
Managei; Dr Barnaidoto, Human Lane, 
Barfcmgsfde, Ilford, HtsexKI:0I-55D-8822. 

Closing date 15th June 1987 

Ibis is a re-advertisement, previous 
applicants need not apply; 

© Bamardo's 




Wi El tarns Holdings have achieved a 
rapid, profitable growth In sales, from 
£5 million to £300 mHBon in five years, 
ft Is their intention to increase this 
pace In the coming years b y further 
organic growth and aqqumton. Tna 
£50 million Vehicle Division Is a key 
part of this future, and requires the 
stewardship of an outstanding Finance 
Director, guiding the business and 
supporting the Managing Director. 

You wHI be an - 

accountant, with substantial experience 
of leasing, hire purchase and contract 
hire. You must have the vi sion a nd 
vigour to contribute to the strategic 
decision making of the business. Your 
career win have progressed Jrv a 

Attractive Salary & 
Prestige Car 

dynamic culture, where you have 
demonstrated the ability , to react to 
opportunity in bath organic 
development and the acquisition of 
new business. 

Apart from an attractive salary, prestige 
company car and large company . 
benefits, you will have the rare 
opportunity of entering a business on 
the threshold of substantial growth, 
providing ample scope lor personal 
development and reward. 

tf you are abie to meet these exacting 
criteria please write with details of your 
career to date to: John Garnish ffm 
AR3008), March Consulting 
March House , 13 Park Street, 


j fj r i yjl :Q3 i 




Senior Executive In late 30’s 
with fine clas»,fln*ncial and ganaral 
rpqnagijmant abilLdta. a miles aulrobla 
position ..with company requiring. 

1 riauaktptnant and .laadatahip. Pack- 
aoa insludaa Intemntlonnl and fund 
raising oxpsriancs. plus FCA. BA, 
and a Sanaa of humour. 

Writs Bax A0635. Financial Timms. 
10 Cannon Strom. London £C4P 4BY 



£43 par aingla column cantimatra 
Premium positions will be charged ES2 
per aingla ocriumn cantimatra 
Far further Information, call: 
Danlal Barry 
248 4782 


executive benefits 


Our client, a pic whose annual turnover now exceeds ,£S0m is seeking a Group Finance Director to 
consolidate and develop its ambitious plans for continued growth. Reporting to the Chief Executive 
the successful candidate will contribute directly to the business planning process and take specific 
responsibility for: 

- Reviewing all accounting systems and ensuring the highest level of financial 
performance throughout the Group. 

- Coordinating Group management informatio n systems and computer strategy. 

— Ensuring that the statutory financial reporting requirements of a pic are met in fulL 

- Financial evaluation of acquisition prospects and major capital projects. 

- Treasury management mdndmg the review of alternative and additional sources 
of finance. 

Applications are invited ideally from q ualifi ed Chartered Accountants, aged 30-45, who must be 
able to display an outstanding track record including broad experience of all the above areas and of 
operating within a manufacturing environment. 

To complement this experience and expertise, highl y developed personal skills are also required 

- The commitment, and energy to influence and motivate at all levels of the Group. 

- The determination and capacity to make a major impact on both operational and 
strategic Group activities. 

-The acumen necessary to advise and act on the implications of all relevant financial 

Applicants should write with full personal and career details (including details of current 
remuneration package) quoting reference PS/2 15 to Paul Bailey, Spicer and Pegler, Chartered 
Accountants, Derby House, 12 Booth Street, Manchester, M60 2ED. 

Spicer and Pegler 

Personnel Sen-ices 

Finance Director 

Bristol c£24,00Q + Car + Bens + Relocation Age 28-35 

Onr client is a fast growing autonomous division of a 
major pic; a market leader in die FMCG sector. This 
marketing orientated firm operates on an international 
basis with a prestigious name. 

They seek a graduate qualified accountant to join their 
dynamic managment team and assume total control of 
thefir finance function. 

. This rtJe requires a strong accountant with the ability to 
maintain tight control over a very streamlined finance . 
department, combined with the commerical 
acumen to deal with aS legal, administrative 
and company secretarial activities. 

Experience of corporate reporting to strict timetables 
utilising computerised systems is essential, as well as the 
ability to immerse oneself in the commerical activities of 
the company at home and abroad. 

Tou will be joining a young and very successful 
management board, in one of the key roles, hence the 
ability to work in a team is essential. 

If you are interested in this rare op p or tu nity then write, 

' ■* — enclosing a comprehensive CV to Paul 

MacDdowie ACA at die Executive Division, 
29 St. Augustine’s Parade, Bristol BS1 4UL. . 

Michael Rage Partnership 

International Recruitment Consultants 

London Windsor Bristol St Albans Birmingham Nottingham Manchester Leeds Glasgow & Worldwide 

A member of Addison Consultancy Group PLC 



A major Investment banking company with a 
global trading presence is seeking several 
Managers and Senior Staff Accountants for their 
tiadng control function. Significant and continued 
expansion has created many opportunities at an 
levels In the trading and capital markets areas. 



Bm* sNary-S35£0O&3aA00 
pitta cm; pipe bonus, plus 
generous range ot beneCK*. 

Selected candJdatBa should possess a University 
degree, be Chartered Accountants with apprac- 
imataly 7 yeara at “Big 8" accounting experience 
plus, iaeaayi 1-2 years experience in amended ser- 
vices oraanteaton. Knowledge of Industry products 
highly cmrirabie. Computer literacy required. 


Base salary £25£00-£2S/X» 
ptam caq plue bonuM, pknt 
generous range of 1 

Selected candidates should possess a University 

dogma be Chartered Accountants with 5 years of 
“Big 8“ accounting experience preferably with a 
financial services sector background. Computer 
literacy required. 

Please send a full CV including current salary to: 

Bos MSK Farad Tom, 

10 Chmi Stmt. Lonfca EC4P 4BY 


Baltic PLC has a record of dynamic expansion achieving an 
annual growth rate of 30% over the past five years. Market 
capitalisation Is in excess of £70 million. We are continuing 
to expand our business activities through asset finance/ 
Contract hire; property investment, development and finance; 
corporate finance particularly BBS and acquisitions, Con- 
sequently we are seeking ambitions, self-motivated decision- 
makers with the creative ability to contribute and develop 
ideas and manage them to a successful conclusion. 

If you can demonstrate an understanding of the legal and 
financial implications of onr business and can show a record 
of success through your own creative and management skill 
then there is a real career opportunity with Baltic. A generous 
remuneration package is available. 

Write in full confidentiality, with a comprehensfre c.v., to: 
The Managing Director 

25/26 Albemarle Street, London W1X 4AD 

Toronto Dominion bank 

The Toronto- Dominion Bank is one of Canada's major international banks with a 
substantial London presence established over the past 75 years. 

V\fe have an attractive opportunity within our London operations for a well 
qualified financial officer. The successful candidate will be based in London and 
will work under the direction of the Bank’s Inspection Division located in our 
corporate headquarters. Leading a smalt internal audit group, the individual will 
have a key accountability of planning and executing a comprehensive and 
ongoing internal audit process. 

The successful candidate will be a highly motivated individual with a professional 
accounting designation, coupled with a minimum two years' related experience. 
Audit experience within a banking environment including the related treasury 
and capital market areas are desirable assets for this important role. 

This assignment offers considerable challenge, scope, and an excellent 
opportunity for career advancement in other key financial areas of our 
organisation, including corporate finance, treasury and capital markets. We 
offer a fully competitive salary and comprehensive range of employee benefits. 

Mt J.W Green, Manager, Human Resources, 

TheToronto-Dominion Bank, 

14/18 Finsbury Square, London EC2A1DB. 




To assist with their continued programme of vigorous growth, a leading U.S. Investment .Bank has 
retained us to recruit accountants for a variety of key roles. These are all new appointments in an' 
entrepreneurial company whose dynamic growth and innovative attitude constantly Creates 
opportunities for progression. 

Fixed Income: Responsibilities include the production of management accounts and maintenance of 
position control for fixed income products in several currencies. 

Equities: Assisting with the preparation of management information arising from a sophisticated 
global equity system. 

Futures: Maintaining control of positions and monitoring of various trade related costs and brokerage. 

Experience from a similar background would be ideal, but strength of character and the determination 
to succeed are essential in a task orientated environment where results are the priority. 

To apply please contact David Goodrich 
Telephone OX-588 7287 

Bell Court House, 11 Blomfield Street. London EC2M 7 AX 






c£3Q,000 + car + 
excellent benefits 


With UC sales growth averaging 35% aramatfy for the 
last lOyeas; febhjBEhipUSinatejatiGfal hasarepu- 
tatron for innovation. 1967 sees the bunch of a major 
new venture. Our client is investing haavify to create a 
team to develop and mate advanced hiiuination 
Technology ftr sheeted martet sectors. The product is 
expected to rapkfybecamea maitet teadec 

lb help achieve these aims the mana gement team re- 
quires a practical Finance Executive with innovative f laic 
Your rote wi involve building and developing a finance 
lean; implementing financial procedures and systems; 
waking closely with other management team mattes 
in devising strategic and business plans; and advising 
on the financial aspects of key decisions. 

Applicants, probably aged over 28 yeas, will be quali- 
fied accountants with broad c om m ercial experience, pref- 
erably at a senior level within a multinational environ- 
ment Experience within the financial services sector 
would also be of interest The Isgh level of commitment 
required wffl be rewarded with outstanding career 

The substantial benefits package includes an attractive 
car package, pension scheme, private health care and 
fufl relocation expenses where appropriate. 

Fbr fata information plana forward Mi carear 
details to Soa Rotator or to tephop q tear [firactfy. 
{Outside office horns 0734 483732). AO app&a- 
tnos w9L of coma, bo banded wBh total 

theffieef partnership 

Financial Recruitment Consultants, 40/43 Fleet Street, London EC4Y 1BT 01-583 6613 


to £38,000 + CAR + BONUS 

Prime Computer is a successful l 
fast growing company with world 
beating state-of-the-art products in Vie 
mini computer industry, and we 
operate on a worldwide basis 

We are looking for an experienced 
International Treasurer to locale and 
manage this function from the UK. 
where we can have access to major 
financial institutions 

We intend to consolidate our 
International Treasury function under 
local management in London. 

As the International Treasurer you 
will be responsible for our total FX 
operations through our investment and 
.finance subsidiaries, and International 
Distribution Centre, ibu will also 
manage the necessary banking 
relationships, develop hedging policies 
and work with the International 
Subsidiaries throughout the world to 
enhance cash management The 
management of our investment 
portfolio is an integral pan of this 
function. )fou will be supported by 
dedicated professional staff and work 

through the local EHQ and UK- 
subsidiary finance operations, who wHI 
provide administrative assistance and 
local management )fou will report 
directly to the USA as pan of the 
corporate treasury organization. 

Experience of international treasury 
is a pre-requisite for applicants. We will 
also require the communication skills 
necessary to work with international 
management in a matrix structure. 

This is a senior corporate 
appointment and will carry an 
appropriate package. Salary will be 
between £33k-£38k and coupled with 
a generous bonus, company car and 
other executive benefits. 

For more details write with a fuff 
CV. to Andrew Turner, Human 
Resources Director, Prime Computer 
Europe/Middle EastlAfrica. 

The Hounslow Centre, 1 LamptonRd, 
Hounslow, Middlesex. Please quote 
reference REG on envelope. 




TO £20,000 + Car 

Orient-Express Hotels, associated with the highly successful Sea Con- 
tainers Group, are seeking an ambitious, self motivated Qualified 
Accountant to take responsibility for our train, retail and travel activities. 

this will include dealing with all the financial aspects of the Venice 
Simplon-Orient-Express, the range of Orient-Express products and the 
company in-house travel agency. Also involved is the supervision of 
staff, developing accounting systems, preparing regular accounts, cash 
forecasting and financial advice to the management. 

Responsible to the Deputy Financial Controller the successful candidate 
will have at least 3 years' post-qualification experience, some of which 
should have been gained outside the profession. Any background of 
working for US companies would also be an advantage. 

For further details please contact Miss A.D. Clarke 
Deputy Personnel Manager 
Orient-Express Hotels Inc. 

Sea Containers House 
20 Upper Ground 
London SE1 9PF 

orient-express hotels 


Central London 

Salary Negotiable up to £30,000 — Age not more than 40 

We are acting for a well-known international group engaged 
in dealing in petroleum products. A reorganisation has involved 
an expansion of the UK operations and created a requirement for 
this senior financial position. 

The Chief Accountant will report directly to the UK man- 
aging director and be responsible for all the financial and man- 
agement accounting functions and the selection and installation 
of a computerised accounting system. This is a key new appoint- 
ment to assist the group in its future expansion plans. 

The position is open to qualified accountants with not less 
than five years post qualification experience in an international 
trading business or other appropriate situation. 

Applications in writing with full CV and salary details to : 


Chartered Accountants 
Sceptre House, 169-173 Regent Street, 

London W1R 7FB. Tel 734 4104 


Corporate Strategy 

Qualified Accountant 


£22,000 +Car 




Within the Corporate Planning Team of thiamsjor 
British Retail Pic your responsibilities wIU inclu de 
assisting with development of medium term strategy, 
acquisitions & profitability analysis. Presentation of a 
monthly commercial summary to the Executive Board Witt 
ensure high exposure at an early stage in your career. 

Based in Central London, promotion is envisaged 
within 18 months to a Divisional Controtterehip. 
Candidates aged 24-28, ACA. C1MA or ACCA, will 
currently be employed either in Professional Practice or 

Please contact JANE EASTON on 01-4Q4"3155 at 
125 High Holbom London WC1V6QA (RecCons) 




Our client, a wen-backed ‘start-up’ 2 years ago, has now successfully 
reached the next Important stage of its development, and is poised for an 
exciting period of expansion. 

Now sought to join a small management team is (ideally) a degree level 
’industrialised CA', aged 30-40, whose experience to date must include: 

* Top level’ financial control and management 

* ‘Shopfloor* management accounting 

* Manufactured capital goods environment 

* Integrated DP monitoring and reporting systems 

For an appointee who can additionally bring personal qualities of drive, 
resilience and flexibility to a small but rapidly growing company environment, 
a commitment to full financial and managerial involvement is promised. 

Candidates, male and female, please write to David T Bentley Manager, 
Human Resources Division, 3i Consultants Ltd, 8 High Street Windsor; 
Berks SL4 1LD, or telephone Windsor (0753) 867175 (24 hour service) for 
further details and an application form, quoting ref DB/666. 

3i Consultants Ltd 

: Human Resources Division 

Lstfsi. j. ..T-W 



Bath Negotiable Salary 


C H Beazer (Holdings) PLC is one of the leading U.K.-based general construction 
companies with international interests in house building, properly, contracting and 
building materials. 

We are seeking an Assistant Treasurer to join our Group Treasury. Reporting to 
the Group Treasurer, responsibilities wHI include dealing on the financ i a l markets 
and will involve cash, foreign exchange and short-term funding management. 
They will also include the operation and development of monitoring and reporting 

The successful candidate will be In his/her late 20s/early 30s, with a professional 
qualification and at least two years* experience in a corporate treasury department, 
banking or accountancy. A proven ability to act on one’s own initiative is an 
essential requirement 

An attractive remuneration package is offered, together with relocation assistance 
where appropriate. 

Applicants should write with a foil c.v. to Hie Group Treasurer, 
C H Beazer (Holdings) PLC, 2 Midland Bridge Road, Bath BA2 3EY. 


Our client one of the largest insurance organisations in the world, writes aB major 
lines of direct, reinsurance, life and marine business, and is represented in over 
100 countries worldwide. 

An opportunity now exists for a qualified accountant with insurance industry 
experience; to setup the Internal audit function fbr Europe. Based in its London 
Headquarters the job holder will report directly to the Vice-President, Internal Audit; 
at the Corporate Home Office in New York. 

Candidates, preferably Chartered Accountants, should be aged 25-35, have good 
auditing experience in the insurance industry and preferably have experience of 
computerised systems. Travel both within Europe and to the USA can be expected. 
This will be a first class opportunity to take up a challenging role with real potential 
for lo ng term advancement Salary will be commensurate with experience and an 
attractive benefit package is also offered. 

For further details contact DavM Frusfteron 01-353 1244, or write enclosing a 
comprehensive Curriculum Vitae to 
ASA International, Ludgata House, 

107-111, Fleet Street London, EC4A2AB. 

I S I International 


c£ 22 , 000 p.a. 

Assistant Financial Controller 
The City 


A recently qualified Chartered Accountant, male or female, is required to assist 
file Group financial Director of this rapidly expanding PLC. The Group provides 
a range of corporate finance, banking and consulting services through a number 
of subsidiary companies. .The Company is pursuiiigapolMy of growthhy 
acquisition. An outstanding career opportunity inafinandal services 
enviroment Fringe benrfits include contributory pension, and raedical/life coven 
Suitably qualified candidates please phone 01-600 4709 for an application form 
quoting GF709 (24 hour service). 








Basedin Central London, oar client* auk* 

IrSnalionai magttgW 3 

currently seeklngabHghLj^^o mdMdu* 

■ fw this key portion. 

Reporting to the Managing Director, wpowl- 
bilities wmTndod*; 

• preparation of monthly management 


: 5 ffissa=sa--wi 

• preparation erf long term plans tea 

aa qualified 
aged 28-35; with at bast 5 years 

PC experience. 

A working knowledge of Ftawh and/arGamn 
would also be an advantage. 

SSSfSSffig** nm 

Davidson at Robert Half ftraonnel. Soman How^ 

Wood Street. London ?C2V SML TWmhcM 
01-638 5191, evening 01-216 9/00. 


\ » 



Central London 

Age: .3545 To; £30,000 pins car 

Our client is a major firm of Chartered Quantity Surveyors 
with offices throughout this country as well as interests 

An excellent opportunity has arisen for a mature, qualified 
accountant to take full responsibility for all fin a n cial and 
administrative aspects of the practice. This senior position 
requires good Inter-personal skills and a keen commercial 
awareness. The opportunity to make a significant 
contribution to the Practice's anticipated expansion offers 
excellent pospecti to the right candidate, 
administrative aspects of the Practice. This senior position 

Please send full curriculum vitae with handwritten covering 
letter to B. E. Ayres, Ref. H229. 

-i i * * J 




SO St. Andrew Street 
Hertford SG14 ]Ja 
T el: Hertford (0992) 59321 
Telex: 818742 MARCA 







The Financial Times proposes to publish a 
Survey on Recruitment and 
Personnel Services on 

July 11987 

Among the subjects to be reviewed will be: 

recruitment consultancies 
testing methods 

For more information about advertising in this 
Survey and a copy of the synopsis, contact: 

Louise Hunter 
on 01-248 8000 ext 3588 

01-248 4864 










Thursday May 21 1987 


Int’l Thomson in loss 


ganisation, the Canadian-owned 
publishing, travel and energy 
group, suffered its first loss ever in 
the three months ended March 30. 

The net loss attributable to com- 
mon shareholders was USSSm, or 1 
cent a share, compared to p*™'np 
of US$1 0m, or 6.5 cents; a year ear* 
tier. Income before pref er red divi- 
dend payments was US$2m. Sates 
rose from USSSOBm to U5S585m. 

Earlier this year ETO switched 
from reporting in sterling to US dol- 
lars, reflecting the growth of its 

North American publishing busi- 
ness. Figures fin: 1086 have been 
converted at an exchange rate of 
USSL48 to EL 

The loss was caused mainly by 
seasonal factors, such as dispropor- 
tionately high overheads allocated 
during the slack winter months to 
the travel business. CHI prices and 
volumes dgrlmwi, . 

taoh oflTO's North Sea oil and gas 
i n te r est s has made the company 
more sensitive to the seasonal na- 

ture of the travel and publishing 
businesses. ITO yesterday said a 
higher pro p or tion of income would 
be earned in the second half o£ the 

Despite seasonal tosses, pub* 
fishing made a "strong start" to 
1087, with improvements centred 
mi British; regional newspapers, 
and US book publishing and bust- 

in the travel division, Thn y n- vp u 
Travels winter volumes were up 48 
per cent Summer sates are 20 per 
cent ahead of last year. 

Belgian retailer has good year 

m -nr uckson in Brussels 

GJHNNO-BM, Belgium's largest re- 

business, htwa «nr|f >n rwH»<I a 

22.4 per cent increase in its consoli- 
dated net profit to HFr L514bn 
($40-6m) in lie year ending January ■ 
3L But consolidated earnings per 
share rose only 115 per cent tn BFr 
4854, largely due to the substantial 
share and bond issue last October 
which increased the size o£ the com- 
pany's equity. 

Consolidated sales (which do not 

include fwwgn in « Wfth 

GB has less thm a 50 per cent 
stake) rose margnally from BFr 
124-flbn to BFr 129Jfon over the 
same period. 

With roughly 8 per of total 
Belgian domestic sales, GB-Inno 
was one of the first in Europe to 
move into mass retailing from its 
initial department store bW. It has 
a wide range of leisure and services 
activities, notably doifcyoursetf 
stores and fast food restaurants 
which it has - Mgnwwi as areas of 
potentially strong growth. It has a 
significant interest in the US DIF 
business through ftfaiwc in Scotty’s 
and Handy Andy. 

The company te now beginning to. 

diversification and closures carried 
out in the last few years and is hop* 

mg to maintain the present rate of 
growth. Its forthcoming nwnmi re- 
port is likely to establish a target of 
doubled profits over the nest five 

Last year, most of the improve- 
ment came from the Belgian opera- 
tions - despite poor consumer 

spending trends — though in future 
the foreign companies are expected 
to make more of a contribution as 
the need lessens to plough bade 
earning s. 

Cash flow last year increased by 
10 per cent to BFr 5L2hn and the 
proposed dividend on the ordinary 
shmes is BFr 225 (BE* 2L5). 

Norway group’s creditors fear write-off 

THIRTY-THREE ; foreign banks 
which provided loans totalling 
about NKr LBbn (J239m) to Kongs- 
berg Vaapenfabrikk (KV), the fi- 
nancially troubled state-owned Nor- 
wegian industrial group, fear the 
Government may ask them to write 
off more than 50 per cent of their 
outstanding loans to the company. 

Ministry of Ind us t ry . are 

deadlocked ova how to rescue the 
company and makegood its loans. 

Three options are being studied, in- 
dading total refinancing, bankrupt- 
cy or an "accord option” requiring 
more than 60 per cent of the credi- 
tors to agree to accept a loss. 

The Government is expected to 
reach a decision by the end of this 
week, but it faces a problem with 
KVs jet engine division, its biggest 

Hie Government needs to secure 
• deal to determine the amount it 

can expert to recover before derid- 
ing KVs future, and what loan rep- 
ayments the bulks can expect 

Negotiations to buy the jet engine 
division are taking [dace with the 
holding company for the domestic 
airlme Braathens Safe, Hetikopter 
Services and Aka Norcem, and 

With the French company SNECMA 
to take up to 70 per cent of the com- 

new offer 
for units 

By Our Financial Staff 

ALUS -C HALMBBS, the strug- 
gling US process e qui pm en t 
group, has received a proposal to 
buy its solids process equipment, 
Stephens- Adamson, industrial 
pump power generation systems 
businesses- for a total price of 

The company had previously 
ann o unced that it had entered 
into a letter of intent with BoBd- 
en a! Sweden under which die 
base metals mnring gro up would 
bay its solids process equipments 
business for about $90m. 

Alfis-Chahners said it afro has 
received a number of other pro- 
posals related to its industrial 
pump business and is in the pro- 
cess of soliciting proposals for its 
Stephens-Adansora and power 
generation businesses. 

AiikJiniwfi f said the 
proposal, from CA LtiL, appeared 
to be subject to obtaining financ- 
ing and to certain other condi- 
tions, indnding entering into a 
definitive contract. 

The company said completion 
of the recently proposed disposi- 
tion of these and other busi- 
nesses was subject, among other 
things, to s uc cess ful completion 
of a restructuring to deal with 
debt and pension obligations. 

Koc Group’s 
earnings rise 

By Dmrld Barehard In Ankara 

THE KOC Group, Turkey's larg- 
est industrial group, wmb net 
profits of $124m in 1986 against 
SS3m in XS&5, on turno v er of 

KOC, whose empire stretche s 
foam the motor industry, con- 
sumer goods, durables and white 
goods to textiles and Hanking, 
still remains strongly tied to the 
home market. 


Lufthansa hit by dollar 


LUFTHANSA, the West German 
state-controlled airline, boosted net 
profit slightly last year to DM 64.4m 
($2L5m) from DM 63m in 1985. Al- 
though it turned in a DM 66 Jim op- 
erating loss as a result of the sharp 
fall of tiie dollar. 

Presenting a mixed picture of 
significant traffic growth disturbed 
by International political crises and 
erratic currency fluctuations, Mr 
FTpftiz Rnhnari , the ehairmap , yes- 
terday, gave a cautious forecast 
about thia year’s results. T nfrinmw 
would, however, remain in the 
black, and planned to boost the 
number of passengers carried to 
more than 17m from 1651m in 1986, 
he said. 

The airline is paying an un- 
changed DM 3.50 dividend on its 

1986 results, with DM 1.4m added to 
reserves. Group profits last year, in- 
cluding Lufthansa's Candor charter 
subsidiary anil other companies, 
rose to DM 709 from DM 66.4m. 

It is raising its basic capital by 
DM 300m to DM 12bn through issu- 
ing ordinary shares. This will 
amount to "a piece erf privatisation,” 
said Mr Gunther Becher, board 
member in charge of finance. The 
voting capital share held by the gov- 
ernment and other public authori- 
ties will fall from 91J2 per cent to 
76.7 per cent after the transaction. 

As a sign of an improving basic 
trend, Lufthansa's loss in the first 
four months of the year - when it 
traditionally works at a deficit be- 
fore the summer traffic pick-up - 
was reduced by DM 33m compared 

with the same period in the previ- 
ous year to DM 182. 

Lufthansa's operating loss in 1986 
resulted above all from the rise of 
the D-Mark against the dollar and 
other currencies, which hit the D- 
Mark value of sales outside Ger- 
many - amounting to 50 per cent of 
its business. 

The figure compared with an op- 
erating profit of DM 152m in 1982 

Lufthansa managed to stay in the 
black overall last year only through 
DM 131m in profits from son-opera- 
tional areas, compared with a defi- 
cit of DM 61m in this sector in 1985. 
The profits here last year were 
made up above all of earnings chan- 
nelled to the parent company from 
Lufthansa's chartering subsidiary. 

Helaba operating profits decline 


laba), West Germany’s fonrth-larg- 
est publicly owned bank, has re- 
ported a 12.6 per cent fall in operat- 
ing profits for 1986 to DM 243m 
(SI 37m) against DM 278m in 1985. 

However, the outcome, which 
was attributable to a slight drop in 
overall profitability and a sharp 
rise on costs, remained "satisfacto- 
ry” and was in line with expecta- 
tions, said Mr Herbert Kazmierzak, 
Hriaba chief executive. The bank is 
paying a renewed 5 per cent divi- 

Helaba's total group assets in- 
creased marginally to DM 70.5bn 
against DM 68.7bn in 1985. Interest 
income fell by 21 per cent to DM 
556m from DM 568m in 1985. 

The bank failed to benefit mark- 
edly from the sharp increase in 
enm missio n earnings reported by 
many of its competitors, with prof- 
its tor fee-related activities rising to 
only DM 70m from DM 65m in 1985. 

Credit volume at Helaba rose by 
25 per cent to DM 528bn in 1986, 
with longterm credits accounting 
for the rise. 

The outlook for 1987 is “cautious- 
ly optimistic,” said Mr Kazmierzak, 
although the bank is expecting a 
further fall in profits this year. 

• Deutsche Girozentrale - 
Deutsche Kbmmunalb&uk (DGZ- 
Bank), the West German bank 
owned fay members of the country’s 
savings bank movement, increased 
its operating profits by 122 per cent 
to DM 171m in 1986. 

Interest income rose by 6.7 per 
cent to DM 224m while commission 
earnings climbed sharply to DM 
16m after DM 10m is 1985. 

Navistar income increases sharply 


NAVISTAR International, the US 
maker of trucks and diesel engines 
which has come back from the 
brink of bankruptcy, has registered 
net income of 847.1m in the second 
quarter to April, a sharp increase 
from the S18m in the 1986 second 

The company, which changed its 
nama from International Harvester 
after a drastic restructuring, also 
reported an i m p ro v ement in sales 
revenues from SSQOm to S93L3m 
»r>d a strengthening in its haism-a 

Navistar’s stock price, which has 

been relatively strong this month, 
closed down Stt at S7%. 

Earnings in the latest quarter 
were flattered by a $21 An tax loss. 
Navistar continues to enjoy tax 
losses capable of sheltering around 
$L3bn in profits 

bid for 

By Jamas Buchan In New Yoric 

CRAZY EDDIE, the pioneer New 
York consumer electronics retailer, 
yesterday said it had received an 
unsolicited $2 19m offer from its 
chairman, the eponymous Mr Eddie 
An tar. 

News ol the S7 a share offer took 
the market by surprise and Crazy 
Eddie's stock jumped S2’i to S7fc. 

The offer, which Mr Antar is 
making with First City Capital 
Carp, was ail the more startling in 
the light of Mr An tar's sudden re- 
signation last January amid ru- 
mours that be was seriously ilL 

Mr Antar, regarded as a gifted if 
eccentric businessman, in 18 years 
built the company from a single 
store in Brooklyn to a chain known 
nationally for its frenetic television 
advertisements claiming "insane" 
low prices. 

The rumours about Mr An tar's 
health hammered Crazy Eddie’s 
stock, which traded over S20 last 
year and was a highly successful 
new issue in 1984. "It was never 
confirmed,” said Mr Edwin Under- 
wood, an analysts at Scott & String- 
fellow, the Richmond, Virginia bro- 
kerage house. 

He said Mr Sam Antar, now joint 
president of the company, had con- 
firmed that his cousin was ill but 
that this was not expected to affect 
his "long-term association, with the 

Since then, Crazy Eddie has seen 
its sales from existing stores fall 
drastically for three consecutive 
months amid intense price competi- 
tion in New York. 

Earnings fell to only 2 cents a 
shore in the March quarter (against 
26 cents) and the company fell prey 
to takeover speculation. 

There were rumours that Dixons, 
the UK retailer specialising in dis- 
count consumer electricals, had 
considered Crazy Eddie before its 
purchase of Cyclops, and its Silo 
ffhain, in March. 

» T* t* -J— 

Jhba(texllxaiiaxa>ajp&awiththem iuh r m t m fftb*CoaixllcfIhe!bod tEwh<m g r . 





8% per cent. Fixed Rate/Floating Rate Notes 1992 

The issue price of the Notes is 101 V 4 per cent, of their principal amount 

ThejbUowmg have agreed to subscribe for the Notes 

Morgan Grenfell & Co. limited 

ANZ Merchant Bank limited 
ftaiyp ie Rationale de Fans 
Baling Brothers & Co* limited 
Credit Lyonnais 

Deutsche Bank Capital Markets limited 
Klein wort Benson li m ited 
Merrill Lynch Capital Markets 
Morgan Guaranty Ltd 
Standard Chartered Merchant Bank 

Credit Suisse First Boston limited 
IBJ International limited 

Banqne Bruxelles Lambert SA 
Barclays de Zoete Wedd limited 
County NatWest Capital Markets limited 
Daiwa Europe limited 
Hamhros Bank Limited 
Lloyds Merchant Bank. Limited 
Mitsubishi Finance International limited 

Sparekassen SDS 
Tokai International limited 

Westdeutsche Landesbank 

Application Hasbeen made to the Council ofThe International Stock Exchange ofthe United Kingdom and theRepubllcof 
IrSwid limited (The Stodc Exchange") for die Notes to be admitted to the Official list. 

Interest at a fixed rare on the Notes will be payable annually in arrear on 5 th June of each year, commencing on 5tfc June, 
198 g.fbrd« period from 5th June, 1987 to 5ch June, 1 990.ft>riheperiod from and tadutfcng5tbjiine> J990rmheHoating 

Rate Intexesthiyinentbate foiling In June 1992, interest at a fioatingrate on tbeNotes will be payable quarterly in arrearm 
June, September^ December and Msj Ju 

Particulars of the and of the Society are availabkin die siatlsrical services of Statistic^ Sorvk^Lr^t^UstiM 

Particulars for the Notes m*y be obtained during usual business bourc up to and Including 26th May, 1987 from the 
Company Announcements Office of The Stodk Exthange and up to 4th June, 1987 from the followings 
Morgan Grenfell Securities limfted, Orion Royal Bank Limited, Halifax Building Society, 
^ 20 RnsW Orais, 1 London Wall, TthtiorRoad, 

London EC2M7BB London EC2Y5JX Halifex, 

and life Stock Exchange 


21st Map 1987 

Thtsadoprtisement c o m pli es u\ ttb tbe req uiremen ts cfTbe international Stock Exchange of the United Kingdom and tbe Repn blic of Ireland Limited. 
The Bonds referred to below have not been registered under the United States Securities Aa of 1933 and may not be offered, sold or delu ered in tbe 
United States of America, its territories or possessions or to United States persons. 



Prudential Finance B.V. 

(Incorporated in Tbe Netherlands with limited liability) 


9V& per cent. Guaranteed Bonds 2007 

unconditionally and irrevocably guaranteed by 

Prudential Corporation pic 

(Incorporated in England under tbe Companies Acts 1948 to 1976, Registered Number 1397169) 

Issue Price 1Q0V£ per cent 

The following have agreed to subscribe or procure subscribers for the Bonds: — 

S. G .Warburg Securities 
Banque Nationale de Paris 
Baring Brothers & Co., Limited 
Credit Suisse First Boston limited 
Deutsche Bank Capital Markets Limited 
Hambros Bank Limited 
Samuel Montagu & Co. Limited 
Nomura International Limited 
Swiss Bank Corporation International 


Morgan Guaranty Ltd 
Barclays de Zoete Wedd Limited 
Commerzbank Aktiengesellschaft 
Daiwa Europe limited 
Goldman Sachs International Corp. 
Merrill Lynch International & Co. 
Morgan Grenfell & Co. Limited 
J. Henry Schroder Wagg & Co. Limited 
Union Bank of Switzerland (Securities) 


Application has been made to the Council ofThe Stock Exchange for die Bonds (in bearer form in the denomina- 
tions of £5,000 and £.100,000 and in registered form in the denomination of £.100,000) to be admitted to the Offi- 
cial List Interest is payable annually in arrear on 4th June, the first such payment being due on 4th June, 1 988. 

Particulars of the Bonds are available in the Exiel Statistical Services. Copies of the Listing Particulars tray be 
obtained during normal business hours on any weekday up to and including 26th May, 1987 from the Company 
Announcements Office ofThe Stock Exchange and up to and including 4th June, 1987 from.— 

Su G. Warburg Securities, 
1 Finsbury Avenue, 
London EC2M2PA. 

Prudential Corporation pic, 
142 Holbom Bars, 
London EC1N2NH. 

2 1st May, 198? 

* -w^, 1 - ■ v». 

Wells Fargo 
& Company 

U.S. $200,000,000 



Financial Time ThnistUy May 21 1SST 


Floating Rate 
Subordinated Notes 
due 2000 


In ambulance with the 
pro v r acm s of the Notes, notice 
is hereby given that for the 
Interest period 
2ist May, 1987 to 
22ad Jane, 1987 

the Nates will carry an Interest 
Rate of TM% per annum. 

Interest payable on the relevant 
interest payment date 22nd 
June. 198? will amount to per USS10.000 Note 
and USS330.S5 per USS50,000 

The Financial Times Is 
proposing publishing 
this survey on 

JULY 29 1987 

For full details contact.' 

earnings up 
18.4% to 
BFr 3.2bn 

Daimler focuses spending on cars 


on 0532 454969 

By William Dawkins In Brussels 



Agent Bank: 
Morgan Guaranty Trust 
Company of New York 

TJi* content, size and publication 
date s ol Surveys in the Financial 

Times are sub [act to change at tha 
discretion ol the Editor 

^Ifr Federal Savings & Loan Association 

,,US$ 150,000,000 
Collateralized Floating Rate Notes 
Due November 1996 
For the Interest Period 
20th May 1987 to 20th November 1987 
the Notes will carry a Rate of Interest of 

7vfe% per annum, with an Interest Amount 
of USS4, 025.00 per USS 100,000 Note. 
Listed on the Luxembourg Stock Exchange. 

Bankers Trust 

Company, London Ageo 

Agent Bank 

Weekly net asset value 

Tokyo Pacific Holdings (Seaboard] N.V. 

on 18.5.87 U.S. SI 57.70 

Listed on the Amsterdam Stock Exchange 

A STRONG rise in interest in- 
come from a buoyant private 
sector lay behind an 18.4 per 
cent rise in net annual profits 
announced yesterday .by 
Kredietbank, Belgium’s third 
largest commercial bank. 

Net earnings reached. BFr 
3.18bn ($86m) in the year to 
last March, up from BFr 
2.6Sbn in 1885-86. As a result, 
the bank is Increasing the divi- 
dend for the fourth year run- 
ning, so that ordinary share- 
holders will receive a 5.7 per 
cent Increase in the net distri- 
bution to BFr 115 pier share. 

Despite the dollar’s fall, the 
balance sheet total ended the 
year up by 9 JS per cent to BET 
997.1 bn. Performance was 
helped by a 10 per cent in- 
crease in all Interest profit, re- 
flecting a lively demand for 
credit from both private, cor- 
porate and individual bor- 

Lending to the private sector 
rose by nearly 12 per cent to 
BFr 290.1bn, reversing the 
slight decline of the previous 
year. Lending to the normally 
credit-hungry public sector rose 
more slowly than in the past; by 
2.7 per cent to BFr 286.6bn. 

Customers* deposits also 
surged ahead strongly during 
tbe 12 months, by BFr 4&9bn to 
BFr 494. 5bn. Other factors in I 
the profits growth were a 
smaller rise in operating costs 
than in the preceding period 
and a decline in bad debt pro- 

DATMLlNL-BENZ. the West 
German vehicle group which 
has diversified into, electronics, 
aerospace and engines, plans, to 
invest up to DU 24b n ($13J>bn) 
over the next five years, most of 
it in the car sector. 

Mr Werner Breltschwerdt, 
the chairman, said most of the 
spending on cars would be 
aimed at further increases In 
quality through improved tech- 
nology and equipment. 

Only a small part of this. 
DM 16bn, would -go on capacity 
increases. He said it would cost 
at least DM Ibn to develop a 
Mercedes car generation and 
twice as much again to build 
the models. 

About DM 4bn of the DM 
24bn will be shared between its 
new subsidiaries, AEG (elec- 
tronics), Motoren- «n<j 
Turbin en Union in engines, and 
Domler (aerospace), with DU 
Sbn going cm foreign lorry 

Last year, group capital 
spending rose from DM 4bn to 
DM 5.4bn, with the inclusion of 

AEG for tbe first tine. A 
further slight rise is planned 
for 1987. 

Daimler, which raised group 
net income in 1986 from 
DM l.SSbn to DM 2.77bn and 
earnings per share from 
DM 67.75 to DU 78.80. is pay- 
ing a DU 12 dividend, the same 
as for 1985 — though without 
that year’s DU 2J50 centenary 
bonus. It did not say how much 
of its 1986 profit came from 
cars and how ranch from other 

Mr Brestschwerdt said the 
Qutlook for 1987 was satis- 
factory, However, be said the 
world economic situation had 
worsened, adding a strong 
warning about tbe danger of 
increased protectionism. 

Group turnover in the first 
quarter was about DU 300m 
higher at DU lSbn, with a 6 
per cent rise to DU 101m at the 
parent vehicle concern. The 
parent growth rate had shaded 
to 2 per cent over the first four 
months through Industrial 
action ahead of the recent 

wages and hours settlement 

"Even if die economic back- 
ground is not as favourable as 
last year and exports arft 
affected by the burden of the 
strong D-Mark, we shall be 
able to continue the growth 
course achieved in past years, 

Mr Breltschwerdt said. 

Acquisitions would give the 
group extra technological 
strength, which should enable 
it to develop growth potential, 
be commented. Cars would 
increasingly become part of 
advanced, computerised trans- 
port systems. New cars would 
be syst ems-orlen rated, a main 
area of future group co-opera- 
tion being the development of 
integrated transport systems. 

Last year, Daimler raised car 
output by nearly 10 per cent to 

was 6 per cent higher at SttfldO 

Asked whether Daimler might 
take « stake to the Etjropeaa 

Airbus consortium, he said tt 
wa« looking at the possibJlnl«. 
Ponder, its s ub si d ia r y. . bn lw a 
parts for Airbuses. _ 

Ur Edxard Reuter, the finance 
director who was recently nude 

deputy-chairman to strengthen 

the leadership of the enlarged 

group, wid its cash 

now totalled nearly DM ISbn, 
but there were no concrete 
plans to spend this. 

Group cash flow last year 
rose from DM 5.7ba to 
DM 7 -lbn, he s*hL Thus 
Daimler was able to finance its ; 
investments entirely from its 
own resources. 

Noting the effect of the 
D-mark’s strength on revenues, 
Mr Reuter said the company 
had managed to offset some of 

594,000 units, with sales split 
roughly halt each between 
domestic and export markets. 
This year, a further rise to just 
over 600,000 cars Is planned. 
Production in the commercial 
vehicle sector, beset by world 
over-capacity and low prices. 

Merloni nets 
L60bn in 
share and 
bond issue 

UBU kw V— — — - ■ _ 

this through price rises snet 
currency hedging. Otherwise, 
the dollar’s fall would have 
cost Mercedes-Benz of North 
America an extra $80Qm. 

Volvo first-quarter income drops by 18 % 


Information: Ptereon, Held ring A Pierson N.VL, 

Herengracht 214,1016 BS Amsterdam. 

Stefanel profits 
rise to L27bn 

By Our Milan Correspondent 





12 Month! 

12 Montha 


on Weak 




US Dollar 






Australian Dollar 





Canadian Dollar 


+ 1.805 








Euro Currency Unit 















Deutsche mark 





Bank J. Von lobe 1 It Co Ltd, Zurich - Telex: 812744 JVZ CM 

STEFANEL, the Italian casual 
clothes producer which Is a 
smaller-scale version of the 
Benetton success story, more 
than doubled its 1986 net profit, 
to 1275bn (321.2m). At con- 
solidated group level the result 
was marginally higher. 

The company, which with 
1986 consolidated group ! 
revenues of L1722bn (8132.9m) 
is about one sixth the size of 
Benetton, is owned by the 
Stefanel family and founded In 

Stefanel is planning to float 
about 25 per cent of its shares 
on the Milan bourse during the 
next few months. 

VOLVO, the Swedish motor, 
energy and food group, suffered 
lower profits in the first quarter, 
hit by tbe weaker dollar and 
higher product development 

Profits (after fina n cial items) 
fell IS per cent to SKr 2bn 
(5321m), compared with 
SKr 2.45bn a year ago. 

No full-year forecast was 
given and Volvo would not say 
whether profits were expected 
to show the familiar pattern of 
tailing off in the third and 
fourth quarters. Profits (after 
financial items) amounted to 
SKr 7.5bn in 1986. 

* Group sales increased by 
5 per cent to SKr 21.6bo, 

against SKr 20.66bn in the first 
quarter of 1986. Lower 
exchange rates for the US 
dollar reduced the value of 
first-quarter sales by about 
SKr lJZbn with just less than 
half of this due to oil trading. 

Mr Pehr GyUenhammar, 
Volvo chairman and group 
chief executive, said: "Volvo 
can continue to earn money at 
today's kronor-doHar exchange 
hate' and I think we have a 
good chance of cantinning to 
make money even with the 
dollar under pressure." 

The US is Volvo's most Im- 
portant market, where it now 
has just over 1 per cent of the 
passenger car market. 

Group operating income was 
22 per cent lower than last year 
at SKr 1.661m. 

Car sales slipped 1 per cent 
to SKr fl^Obu, but demand in- 
creased in Western Europe and 
Japan. Demand in North 
America declined but showed 
signs of recovering towards tbe 
end of the period. Volvo 
delivered 118,000 cars during 
the first three months compared 
with 108,000 in die correspond- 
ing period last year. 

Mr GyUenhammar said that 
even excluding the car division, 
the group could have made a 
profit of SKr 2Jbn. 

Volvo's food division showed 
a 98 per cent increase in sales 

to SKr 2.43bn. chiefly due to , 
the acquisition of Cardo, the 
investment company, which 
owned several food companies , 
including Swedish Sugar. These , 
results were consolidated in i 
April. 1986. , .I 

Volvo’s trading division suf- 
fered a 14 per cent fall In sales 
due to lower oil prices and the 
weak dollar. 

Truck sales increased by 5 
per cent to SKr 3.77bn and 
demand in Western Europe and 
the US was strong. 

Volvo said that orders for 
buses and bus chassis showed 
in increase and that the total 
market for heavy buses re- 
covered slightly. Sales totalled 
SKr 37m. 

Winterthur up 21% after underwriting improvement 


THE Winterthur, Insurance 
group last year made consoli- 
dated net profits of a record 
SFr 172.2m (3118m) after tax. 
This figure, 2L7 per cent up 
on 1985, came from a slight 
overall improvement in under- 
writing results and very good 
investment incomes. 

Winterthur Swiss Insurance, 

the parent company, whose net 
profits rose 12.5 per cent to 
SFr 105.1m. is to propose 
raising dividends on increased 
capital to SFr 60— from 
SFr 57 in 1985— per share and 
SFr 12 per participation certi- 

Shareholders will also be 
asked to create approved 

participation — certificate 
capital of up to 500,000 certi- 
ficates of SFr 20 nominal value. 
Together with the remainder 
of a similar approval granted 
in 1985, the Winterthur board 
would be able to issue up to & 
total of 740,000 of these non- 
voting shares at its discretion. 

Total premium income of the 

entire group rose in local cur- 
rency terms by 8.4 per cent in 
1988. In Swim francs, however, 
this fell by 1 per cent to 

SFr 7.66bn. In tbe non-life 

sector, the underwriting loss 
was reduced to SFr 367.6m, 

with an overall pretax profit 

figure of SFr 239.5m— up 13.8 
per cent on the year before. 

By JUati Fll ** w b 

XEBLONY Bertntowsicl. 
the second biggest horn* 
appliance manufacturer Itt 
Italy iftw guuuari. baa rawed 
Lsefcn through a 

first-time ah are and bend 

tacue os the autan bourn and 
- in Loudon. 

XcrtoAL which until new 
Was wholly owned by Mr 
Vittorio Merloni, farmer 
pieaident of the Canted gztxta 
employer** jpuoclatiffn, hsa 
suceearfa tiy floated M per 
m i»t of tta shares to raUn 

A amount was 

raised by the tone of five- 
year bends convertible into 
M er l o ni shares and carrying 
■ T per cent coupon. 

If tbe paper h fully con- 
verted — bondholder* may 
up the option from next 
year — the propart lea of 
Merloni** equity on the Mock 
market win rise t® 40 per 

About owe fifth of the 
shares and bonds on offer 
were placed from London 
with fmwnuRhwsI Investors 
la an o p eration coordinated 
by Swiss Bank Corporation. 
The Italian share and bond 
offer was organised by a con- 
sortium of 31 banks led by 
Banca Conawrdah Italians. 

Tha company, which mar- 
kets its washing machine*, 
refrigerators, freezer*, cookers 
and dishwashers under the 
Aristas label, last year had 
LS12bn of total revenues, 
against LMlbn In 1985. Cnn- 
•slfdatod not profit last year 
was ULSbn, up from L3£bn. 

The Ariston brand has a 
share of about 15 per cent of 
the Italian white goods mar- 
ket, compared with Zanussi's 
23 per cent. Candy’s 13.5 per 
cent. Ocean’s 8J per cent and 
Indesit's 4 per cent. 

Merloni said that 43 per 
cent of its total sales last year 
came from outside of Italy. 
The company has a workforce 
of 3^00 employees, of which 
920 work abroad. Merloni 
operates five factories in 
Italy, one In Portugal and ono 
in the UK. 

f . i | f j 

:? l t ’ 

ail i 

* * I 



.This annoi^ernait oppyarsos a matter of record only ■> _ .. 

NEW ISSUE 13th May, 1987 

Allthese securities having been sold, thbaMfpmc^tent appean asp nutifer of record onfy. 


13th May 1987 



Jl i )' 

Marubeni Corporation 

ilu i 



2 per cent. Guaranteed Notes due 1992 

2 per cent. Guaranteed Notes due 1992 


to subscribe for shares of common stock of Marubeni Corporation 
unconditionally and irrevocably guaranteed by 

The Fuji Bank, Limited 

Issue. Price 100 per cent. 

(European Tranche US$200, 000,000) 

YamaicU International (Europe} Limited 

Fuji International Finance limited 

Morgan Stanley International 

Bank of Tokyo International limited 

Bating Brothers & Co , Limited 

County NatWest Capital Markets United 

Dresdner Bank Afctiengesellschqft 

FBI International United 

MerriU Lynch Capital Markets 

The Nikko Securities Co *, (Europe) Ltd* 

Nomura International Umited 

J. Henry Schroder Wagg & Co* Limited 

Swiss Bank Corporation International Umited 

Citicorp Investment Batik Umited 

James Capet & Co* 
Daiwa Europe Umited 
Goldman Sachs International Corp. 
Kleinwort Benson United 
New Japan Securities Europe United 
Nippon Kangyo Kakumaru (Europe) United 
Prudential-Bache Capital Funding 
Societe Generate 
Tmyo Kobe International Umited 

Union Bank of Switzerland (Securities) Umited 

Yasada Trust Europe United 

S* G* Warburg Securities 


to subscribe for shares of common stock of Marubeni Corporation 
unconditionally and irrevocably guaranteed by 

The Fuji Bank, limited 

Issue Price 100 per cent. 

(Asian Tranche U.S.$100 ? 000,000) 

The Nikko Securities Co, (Europe) lid. 

Fuji International Finance (UK) limited 

BOT International (ELK.) limited 
ANZ Securities Asia limited 

DBS Bank 
IBJ Asia limited 

Manufacturers Hanover Asia limited 
Morgan Stanley International 
The Royal Bank of Canada 
Singapore Nomura Merchant Banking Limited 
VKirdley limited 

Yisuda Trust ami Finance (Hong Kong) Limited 

Kleinwort Benson Limited 
Citicorp Investment Bank Limited 

Daiwa Singapore Limited 

Indosuez Asia (Singapore) Timi^ 
Jardine Fleming (Securities) limited 
Morgan Grenfell (Asia) Limited 
Okasan International (Asia) Ltd. 
Sanyo Securities (Asia) Ltd. 
Tiiyo Kobe Finance Hongkong Limited 
^amakhi International (HJKL) limited 

Financial Times Thursday May 21 1987 


“Clients used to come to us 
for our money Now they want us 

for our ideas’’ 

J.E Morgan continues to innovate in complex finan- 
cial assignments — like the securitization of assets. 

We recently packaged and placed $12 billion of 


tion. Our auction format reduced the all-in cost 
considerably. And because we placed this deal 
privately, we were able to offer a floating rate - an 
option not currently available in the public market 
Auction form at, fi xed-rate, floating-rate, capped. 


to strategy 

in over $17 billion of asset-backed financings. As 

always, our new ideas serve our 
best idea: to put our clients’ inter- 
ests first, in a context of absolute 
confidentiality and objectivity. 

CaHoan, credit-card, lease receivables, even salvage rights: 
Jf! Morgan has securitised them alt 

IE Mopn » *• fcr 



Financial Times Thursday M*y ** 

How Chrysler Financial lowered its 
floating rate financing cost 

With an AAA rating and portfolio approach, 
Prudential-Bache Capital Funding acts as 
principal counterparty in every swap we 
execute. This gives us maximum flexi- 
bility in structuring transactions and 
lowers costs. It enabled us to give 
Chrysler Financial the best 
deal possible. 

We’ve done the same 
thing using the global capital 
markets for Swedish Export 
Credit, Emerson Electric Co., 

Mitsui & Co. and over 300 other 
companies, governments, federal 
agencies and financial institutions. 

It’s this kind of capability that 
helped us execute over $20 billion in 
swaps and Eurobonds last year alone. 

Prudential-Bache Capital Funding Wik 

Australia • Belgium • Canada • France • Germany • Holland * Hong Kong • Italy "Japan • Korea • Luxembourg • Singapore -Switzerland* United Kingdom* United States 


Financial Times Thursday May 21 1987 



Banks’ floating-rate notes 
hard bit by Citicorp move 



PRICES TUMBLED in the bank from lows plumbed in February, yields 8.67 per cent 
sector of the Eurodollar floating The secondary market in trading at 102$ 
rate note market yesterday, and straight dollar Eurobonds also Polly Peek, the British-based 

market makers widened the looked decidedly sickly after trading company headed by Mr 
margins at which they were pre- Tuesday's sharp falls in the US Asil Nadir, launched its first 

Treasury bond market 

pared to deal in US bank paper. 

The cause was Citicorp’s 
declaration on Tuesday that it 
would boost its loan-loss re- 
serves by $3bn to reflect its 
exposure to Third World 

After telephone consultations 
early yesterday, market makers 
agreed to broaden dealing 
spreads to 25 basis points for 
US bank paper with a ftwni 
maturity of before the end of 
be dealt on. a 50 basis point 
the century, while paper matur- 
ing in the 21st century would 
spread. This compares with 10 
basis points on Tuesday. 

Prices of US bank paper fell 
by up to 2$ points, before 
staging a partial recovery. 
Longer-dated, highly-subordi- 
nated issues were the worst 
hit. Citicorp's own notes 
maturing in 2011, for example, 
were quoted at 93$ bid 93$ 
offered late yesterday, against 
95 bid 95.10 offered at Tuesday's 

Prices for peripheral floating 
rate notes — paper Issued by 
banks with no final maturity 

Falls of up to 1$ points were 
recorded In early trading, but 
the presence of a large number 
of dealers in Oslo for toe 
annual meeting of the Associa- 
tion of International Bond 
Dealers subdued secondary mar- 
ket trading; A steadying of the 
dollar and a consolidation in 





New York yesterday 
sequently helped calm 

The primary market again 
saw a smattering of issues, with 
volume in toe Australian dollar 
sector again benefiting from the 
malaise of the US market. 
Denmark returned to the Euro- 
bond market for a Af75m Si- 
year issue led by Warburg 
Securities, priced at 101$ wifS 
a coupon of 14 per cent. 

Swiss Bank Corporation Inter- 
national brought Gbrozentrale 
of Vienna for a Ag75m issue for 

international borrowing on the 
Swiss market. The SFr 65m 
issue, led by Warburg Soditic, 
win be divided into five- and 10 - 
year-. tranches with indicated 
coupons of 5$ and 3 per cent 
respectively, and Indicated con- 
version premiums of 25 and 5 
per cent respectively. 

The Swiss market was steady 
in fairly active business with 
the focus on high-yielding 

The West German market, 
meanwhile; eased in line with 
New York but later recovered 
somewhat A new federal band, 
expected at DM 4bs over 10 
years, will be launched cm Mon- 

Also in the equity-linked 
sector. Coeur d’Alene Mines, 
US silver producer, nude 
350m convertible issue likely 
to be seen as an inflation play. 
Led by Kidder Peabody Inter- 
national. toe 15-year issue has 
an indicated coupon of 6 per 
cent, and an indicated conver- 
sion premium of 23 to 26 per 

ScOes, a Japanese machinery 
group, made a $32m five-year 

2SMMȣ2L"5fi5 TTSST&rZfJSS 

Dated UK bank paper was 
also hit after the Bank of 
England said it expected British 
banks would have to boost 
provisions for their . sovereign 
loans. However, dated UK bank 
paper closed with, net losses of 
about $ point on the day. 

Until the Citicorp announce- 
ment, the bank FRN market 
had been steadily recovering 

coupon and 101} pricing. Mean- 
while an : issue for WestLB 
Finance was expanded from 
AS50m to A$75m. 

There was also an increase, 
from JElOOm to £11 Om, in 
General Cinema’s bond con- 
vertible. shares of Cadbury 
Schweppes. The issue- was 
assumed a semi-annual 5 net 
cent coupon and toe put option 

warrants led bv Daiwa Eorone 
and guaranteed by Mitsubishi 

Wood Gundy led a C$30 m 
issue for Trfanae. a Canadian 
bulk carrier, with a 10-year 
maturity. 7$ per- cent coupon, 
and a conversion premium set 
at 19.79 ner cent. Unieharm’a 
bond with warrants deal was 
increased from S50m to 370m. 

Tokyo permits short sales of bonds 

THE JAPANESE Ministry of 
Finance yesterday notified 
securities companies and banks 
that bond dealers will be per- 
mitted to engage in short sales 
of bonds, with effect from today, 
our Tokyo staff reports. 

Bond dealers at Japanese 
securities bouses will be pop- 

foreign securities houses up to 
the equivalent of their brandies’ 
financial resources. 

Bond dealers at banks 
licensed to engage in fall bond 
dealing will be allowed to sell 
up to 20 per cent of their 
broadly defined net worth. 

houses have been pressing the 
ministry for many years to 
authorise short sales of bonds of 
up to 50 or even 100 per cent 
of their net assets. 

Foreign brokers operating in 
Japan have been asking toe 
ministry to add the net assets of 
their headquarters to their cal- 
culations, since their net assets 

_ bouses and hanks 

will be required to report their , 

mi tied to sell short opto 30 per short sales amounts to the minis, in Japan are substantially lower 
cent of their company’s capital try every month. than those of the leading 

and reserves, and those at The big Japanese brokerage Japanese brokers. 



Gfcvribii Electric 5 93 „ 
Cn*U National 4H% — - 

Kingdom 5% 92 

■IMhr. w ^iw^ wHk . VIM, 

Hac.dc France 5% 94 __ 
Kami Etodric V|94 

— - 

BHCFfckfo as 

Swede* WngdnmSH 93 „ M 







Listed are the latest i n t e rnati onal bonds far which there Is an adequate secondary market 

dosing prices on May 20 

t» hollas camps*' 

snuusms ''.Had*.** •»» *v wo* 

Abbey NaUora! Tfe 92 — *'jm VL -»% -4% -»j 

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temptall Sow 101*93— W Uft 2Wb -S% W 

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Canadian Pac 10% 93 2M MS’. «»% -ft -ft MI 

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CNCA7%92 » «"• 5 "S “S' W - - - - . - , 

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w ift nv 
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Fort Motor Cred. 10% 91 -JOB 
Fort Motor CmLllft 90- -IN 
Gen. Elec. Crtti. 10%<XI_ 2M 

Hoevh 71,92 . IN 

Hoesdi7^9« SN 

HoeKb8\«97 IN 

Uoeny Mntoal 8b 96 US 

LTCfl of Japan 8 91 

LTC6 of Japan 097 

MettdL-B«nx Grad. 7*t 93 


Miiwal America 7*a 92. 

Norway Kingdom 7t, 91 
PeoDco Inc. 7*, SB — — 
Qmias Airways 10% 95L— 

UDeeulaad Soft, left* 95 

Ratmn Purina Uti 95 — . 

Saab Scania 9b 91 — — — 


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. m Uft to -ft -ft 936 
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9*_9* ^ 


Swed. Exp. CwLXO 92 » 

Sweden 96 -~— 

Sweden 7 92 , 

Sweden Kingdom 10% 90 

Sweden Kingdom 791 — 

TWyo Finance 72, 94 — ~- 

Toyota Motor Crtd. > 89 

Toyota Mtr. Ovd. 7% 92 

Victorian Rap. 11%92— ~ 

WorM &Mk792 

YOBiOa Trial Fb-ftO 

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Rggri Tmstco 10V 90 CS 
Sean Acc 10% 92 CS~. 
Coca-Cola F. C.17 90 NS 
Denmarit 17% » NS — 

Denmarit 7V 92 Eca- 

El B 7% 91 Ecu _ 

Einwtom 7% 97 Em — 

New Zealand 7% 93 Eca _ 

SDRTy 95 Ecu 


Mart. Bk. Denmarit 6 91 FI 

Tbyntn 7% 90 FI 
Westancn 6V 90 FI —— 
American Brand 9%94£„ 
Aowr. Eastern DC 10 94 £ 
DeotKbeBaakVVWS — 
Hafibx Bbt Soc 10V97£ 
imp. diem. Me 10 03 E« 

75 197% 97% 

75 9S88% ’Wn 
U 96 96% 

75 99V .MOV 


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Land Securities 07 £ 

Leeds BMg. Soc. 10% 
Nationwide BS 10V93 £ 
NSW Treasury 10% 92 £_ 
(met. 10% 92£ 

91 E N 

its SSStSi 

"•» "¥• *§? TrustinuH Forte 11% 




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8 94 ms m% ng 

Austrian Eiec Co. 6% 95 US l»i lift 

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FWanilRaMiMG792 M 

Komcb inti. F1n>7 95 — US 

Hydro Qtmbec5% 96 

Hydro 0w c616 US 

1ADB697 MS 

IBJ5V96 wgg- M 

JagM Flnaoca 5V 97 — — US 

Jotto Baer 801*294 US 

Korea Dev. Bartt AVn-- J* 

MHsublsbl M. 3% W WW US 

MHsubWri M. 3% 89 XW US 

Rattle 7% 95 — JJJ 

Sac. Cent. Necfear 7% 93 US 


Yensttre mtl.6%01 


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African Dee. St. 96 — 


5S m 

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S M 




ABwta393 . 

AWance 6 Uric. Bldg. 94 £ S. 

BdglaoL Hhgdam o!91 S 
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Chaee Mm*atae> Cerpn. 91 

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QTVeFVtawdal Timet Uity 1967. Raprod uctloa h> nfeiie or kijW^ ki 
an form rat petirttfadtailta* wiftMo taams. Bats wpptad ta 

banks to 
give more 
data to Fed 

By Yoke Shtbata in Tokyo 

hanks and one city bank have 
agreed to supply information 
about their capital ratios to 
the.. US Federal Reserve 
Board la support of their 
plans to form subsidiaries in 
New York. 

The hanks concerned, 
Yasnda Trust sud Ranking, 
Sumitomo Trust **M f Bank- 
tog, Mitsui Trust and Bank- 
ing, Toyo Trust Banking, and 
TaXyo Kobe Bank told the Fed 
late last year at theta tatenr 
tions to set vp trust offshoots 
in New York. 

However, format applica- 
tions have been pending 
since the Fed asked the 
banks for information on 
their eapitaS structures, ki 
.line with the capital adequacy 
rules and definitions at 
primary capital agreed 
between US and UK bank 
regulators. The Fed aiso 
requested detailed Informa- 
tion on- the trust banks’ un- 
redsed profits on securities 

The Fed’s request eame in 
toe wake of the US-UK accord 
on capital adequacy standards 
for banks, which lay down a 
net worth ratio of at least 8 
per rent, excluding unrealised 
profits on securities holdings. 

Japanese bankers inter- 
preted the Fed's suspension 
as a deliberate reaction to 
their institutions’ aggressive 
takeover tactics in the US and 
their growing presence in 
world financial markets. 

In addition, the New York 
Fed has withheld approval of 
the Locsg-Tena Credit Bank of 
Japan's application to buy a 
stake in Greenwich Capital 
Market a US primary dealer, 
by telling the bank M the 
potttical environment was not 
ifxht/ r 

The Fed’s unusual request 
for information has eonfnsed 
and upset toe five Japanese 
banks. They say such details 
have never been sought by 
toe Japanese Ministry of 
Finance or Bank of Japan. 

Under the recent broad 
agreement readied between 
the US and Japanese regu- 
latory authorities on toe 
finandal disclosure required 
for applications to set up sub- 
sidiaries, however, toe 
Japanese baste will submit 
details of their unrealised 
profits from securities — 
information which they are 
not required to report to toe 
Japanese Wnan#^ HHnklyy . 

Even so, there Is no gnarau- 
»tee that. the. banks’- wfll meet 
Fed approval for New York 

Merrill joins 
Indian mutual 
fond venture 

By R. C Murtfcy In Bombay 
and Unit Trust of India, that 
country's main investment 
institution, plan to launch 
Jointly a 9100m mutual fund 
to the US for investment in 

The proposal follows 
interest generated in the 
existing India Fund, which 
was strongly supported by 
expatriate Indians and over- 
seas Investment trusts. 
Initially for $80m it was 
redesignated a sterling fund 
of £75m. 

India Fund’s net asset 
value has been below par 
recently, for wfaleh the strong 

pound and depressed share 
prices In India are considered 

Hr M. J. Pherwanl, UTI 
chairman, says prospects for 
a revival in net asset value 
are good with the current 
turnround to India's share 


UTI is seeking permission 
from the US Securities and 
Errhao g* Commission to 
launch the new dollar- 
denominated fund and experts 
good response front expatriate 
>iwH,be rang American 

A second rupee mutual 
fund is to be launched by 
SBI Capital Marketer a sub- 
sidiary of State Bank of 
India, the country’s largest 
commercial bank. 

Hilary Barnes on the effect of market liberalisation in Denmark 

Danes face up to changed climate 

COPENHAGEN’S financial 
sector is undergoing profound 
changes under the dual impact 
of domestic reforms and liberal- 
isation of international capital 

This year some of the oldest 
and most respected city broking 
firms will disappear as. a reform 
of the stock exchange is imple- 
mented. But other brokers are 
responding to the challenge of 
change by thrusting vigorously 
into new business areas. 

One such firm is Gudme 
Raaschou, Copenhagen’s biggest 
broker with over 100 employees, 
which was extensively re- 
organised at the beginning of 
this year. The former partner- 
ship has been dissolved and 
replaced by a holding company, 
a banking company and a brok- 
ing company. 

The main influence for change 
In Denmark is the international 
process of liberalisation, for 
which the Danish authorities 
have shown much greater en- 
thusiasm than their counter- 
parts in other Nordic countries. 
Almost all restrictions on 
capital movements in and out 
of Denmark have been removed. 

The Copenhagen Stock Ex- 
change was reformed this year 
In direct response to the more 
liberal climate. 

In the past, broking was 
carried out by 27 firms with a 
monopoly of trade on the stock 

exchange. These firms were 
partnerships with the partners 
haring personal liability. 

Recent legislation ended the 
partnership system. Brokers 
must now be incorporated as 
limited liability companies. The 
change enables banks and other 
financial institutions to set up 
broking subsidiaries. 

Several former partnerships 
decided that they could not 

Several partnerships 
decided they could 
not compete and sold 
out to the banks 

compete with the newcomers 
and sold out to the banks. 

Gudme Raaschou, however, 
has chosen a different route, 
expanding into areas where It 
is in direct competition with 
the banks, especially in the field 
of corporate finance. 

To this end the partnership 
recruited Mr Kaare Dullum in 
1984. Mr Dullum was for many 
years the financial manager at 
Novo, the Danish insulin and 
enzymes manufacturer, where 
he established an international 
reputation by pioneering the 
first international flotation in 
recent times, of equity in a 

Scandinavian company. 

Besides being on the super- 
visory boards of the Gudme 
Raaschou holding company and 

the broking company, be is also 
chief executive of Gudme Raas- 
chou Bank. 

Mr Dullum sees opportunities 
for Gudme Raaschou coming 
from the development of a 
greater sophistication in many 
of its activities. 

A few years ago, Danish com- 
panies in need of investment 
banking services, had to go to 
London. New York and Switzer- 
land, be said. "We are now 
able to offer many of the ser- 
vices which we could not do a 
few years ago. 

“ Over the past two or three 
years we have developed an ex- 
pertise enabling us to compete.'* 

This is a direct result of the 
wealth of new opportunities 
which have emerged over the 
past few years for firms to raise 
finance both at home and 
abroad. In turn, this has gene- 
rated a need for independent 
financial advice and consultancy 

Gudme Raaschou Bank, with 
share capital of only DKr 50m 
($7.48m), does not make loans 
to big industrial customers. It 
leaves this business to the 
larger banks. 

“ We come in from the other 
side, as an investment bank. We 
try to make the market as trans- 

parent as possible for the 
customer,’' said Mr Dullum. 

Project financing, advice on 
capital structure and foreign 
exchange risks, private place- 
ments and share flotations, and 
assistance with mergers and 
acquisitions are among the 
main services offered. 

Portfolio management has 
become another important new 
field. With the Danish market 

Opportunities seen 
coining from more 
sophistication in 
many activities 

almost isolated for nearly 50 
years from international 
markets, and the Danish equity 
market comatosed, portfolio 
managers had only one choice 
—domestic bonds. Not surpris- 
ingly, portfolio theory had 
become a neglected aspect of 
economies in Denmark. 

Local expertise has therefore 
to be built up to order to com- 
pete with international financial 
advisers. Gudme Raaschou is 
not alone in developing the new 
services, but an early apprecia- 
tion of the possibilities has 
probably given ft an edge over 
many local competitors. 

Credit Agricole reform bill wins approval 


FRANCE’S council of ministers 
yesterday approved the bill 
which will return control of 
Credit Agricole, the country’s 
large agricultural bank, from 
the state to its regional member 
banks. Banker valued the deal 
at up to FFrlflbn ($3bn). 

The bill effects what is 
officially described as the 
mutualisation of the Credit 
Agricole, but has been labelled 
by many as the group’s privati- 
sation — although shares will not 
be offered to the public. 

Mr Alain Juppe, the govern- 
ment spokesman, said the 
change “responds to the wish 
to lighten the control of the 
state over one of the principal 
finanotal networks.” 

The plan has. however, 
aroused hostility not only from 
trade onions and the opposi- 
tion Socialist party, but also 
within the Government itself. 
Some ministers view the change 
In the Credit Agricole’s struc- 
ture as a personal whim of Mr 
Francois Guillaume, the agri- 
culture minister,- with little. 

financial logic. 

Mr Guillaume has said the 
reform will “hand the Credit 
Agricole back to the farmers.” 

The reform bill, which should 
be put before parliament in the 
current session, aims to trans- 
form two central organs of the 
Credit Agricole group into com- 
mon law companies. 

Caisse Nationaie, which acts 
as a central treasury to the 94 
regional Credit Agricoles, will 
be merged with the joint 
guarantee fund, which insures 
the regional banks. 

The state will then sell 90 
per cent of the new company to 
the regional banks, with 10 per 
cent of the capital reserved for 
employees of Caisse Nationaie 
and its subsidiaries. 

As with other, more conven- 
tional denationalisations, the 
privatisation commission will 
fix a minimum value for the 
state to give up its ownership 
of Caisse Nationaie. Purchasers 
will be allowed a five-year delay 
before they have to pay, how- 
ever. - • 

The offer will require 75 per 
cent acceptance by the regional 
Credits Agricoles. 

Although the reform is aimed 
partly at making Credit 
Agricole compete on a more 
even footing with other banks, 
the Government has decided 
not to remove tis two distinctive 
advantages— its monopoly over 
the distribution of state- 
subsidised agricultural loans, 
and its guaranteed share of the 
deposits of official notaries, 
totalling around FFr IZbn. 

The state will also retain the 
right to approve nominations to 
the post of managing director 
of Caisse Nationaie. 

The whole Credit Agricole 
group, including both Caisse 
Nationaie and the regional 
banks, recorded profits of 
FFr 1.55bn last year with total 
assets of FFr 997bn. 

With over 20,000 offices in 
France, the group has more 
than 14m account-holders. It 
claims to handle nearly one- 
third of all the current accounts 
to France, and to be the issuer 

of 38 per cent of the bank cards. 
The group also claims to have 
handled 18 per cent of the 
shares sold to the French public 
in the recent privatisation of 

Credit Agricole lent 
FFr 23.3bn to the agricultural 
sector last year, around 70 per 
cent of total agricultural lend- 
ing. A further FFr 2.4bn of 
loans were made to the 
agricultural and food industries. 

Agriculture is no longer the 
sole mainstay of the “green 
bank;” consumer lending rose 
by 60 per cent last year, for 
example, and lending to small 
urban businesses has also 
advanced. Under the new law, 
however, farmers’ representa- 
tives will maintain control of 
75 per cent of the board seats 
on the regional banks. 

The Government has over- 
riden on this point the objec- 
tions of the Conseil d'Etat, the 
French constitutional advisory 
body, which had said that it 
would he wrong to attribute 
these seats to advance 



| Transportation oqpt.. woapacoi | 



Fimt Quart * r 





Op. net Income 



Op. net nor shire — ... 

t Lett 






Fhmt quarter 



6 il-4-.^e ■ 





t 1UM 

1 La 

LT1 — 



Fourth quarter 


s ! 





Op. net par share — — 

tO. 78 





1 45.0m jl 16.5m | 

Op, net par anew 



t Lou 

TOYS " R “ US 

Toy retailing 



Hwt quarter 





Net Income — 



Net per there 




Mr M. R. Angus, Chairman of Unilever PLC, 
presided at the Annual General Meeting of the 
Company on Wednesday, 20th May, 1987. 

The Report and Accounts were adopted. 
Coopers & Lybrand were re-appointed 
auditors and a final Dividend for 1986 declared 
at 36.17p per 25p Ordinary Share making a 
total Dividend for 1986 of 51.1 6p. 

All Directors, other than Mr K. H. Veldhuis who 
has reached retirement age, were re-elected 
and Mr N. W. A, FitzGerald and Mr J. Peelen 
were also elected to the Board. 

Among items of special bus! ness the meeting 
resolved that as from 29th June, 1987 each 
Ordinary Share of 25p in the capital of the 

Company be divided into five shares of 5p 
each and that new Articles of Association of 
the Company be adopted embodying this and 
other administrative changes. 

The Company has published a report made to 
the British Government under the EEC Code of 
Conduct for companies with interests in 
South Africa. 

Also recently published are two booklets 
which refer to the 1986 results; the Annual 
Report and Salient Figures and the Annual 

If you would like to receive copies of any of 
these publications please use the coupon 


Please tick as required: 

Annual Report & 

Salient Figures 1986 

Annual Accounts 1986 

Report under the EEC Code 
relating to South Africa 

20th May 1987 




To: External Affairs Department, Unilever PLC, 
P.O. Box 68, Unilever House, London EC4P4BQ. 



Part of everyday life in 75 countries. 


US$125, 000,000 Floating Rate Notes Due 1997 
For the dot months 

20th May, 1987 to 20th November, 1987 
the Notes will carry an interest rate 
of 81^6% per annum and coupon amount of 
US$412.08 pet US$10,000 note 

listed on the Luxembourg Stock Exchange 

Bankers Trust 
Company, London 

Agent Bank 

Companies limited 

(hearpamted wish Smiled 

05.130000000 Hairing Bite Note 

box dm May Hg7 
Maturity data tot May 1992 

For the three month Interest 
period from 21st May 1987 
to 21s August 1987 the rate 
c{ inure* on the notes will be 
7VifiX per annum. The interest 
payable on the relevant Interest 
payment date will belLS.S950J.47 
per ILS. S50CUXX) note. 

Morgan Gren&H & Co. Limited 
Reference Agent 





-10%% Guaranteed Notes 1991 
(Quvanimff^aArMusffAHRic ) 

-11%Guaranteed Notes 1989 

IQuaramewe* B AHnauanesa) c) 

The 1966 Report and Acwunia ol an 
companies tel wed to strove are available or 
request (ram The swwtaiy B/J mauwies 
pl£. 50 VttOtaSUtat, London SW1H0HL 



$ 325 , 000,000 

syndicated term loan facility 
to cover the tender offer 

Banner Industries , Inc. 

for the purchase of 
up to 100% of the 
common stock of 

Rexnord, Inc. 

We provided financing, grngiggtftfla transactor;. 

syndication and subsecrjem senior debt, and acted as agent - 

$ 5 50 , 000,000 

to refinance the 
purchase consideration 
and working capital 
requirements of 

Rexnord, Inc. 

consisting of short and medium 
term loans, revolving, bridge and 
working capital financing, and letter 
of credit facilities 

We syndicated this facility, provided the financing 

and acted as agent tor the transaction. 


Fjjxmcial Times Thursday May 31 19 S 7 


Sony sees weaker result 
after first operating loss 


SONY, tiie Japanese consumer 
electronics producer, has had 
to put off until 1988-89 the 
earnings recovery it is seeking, 
and sow expects a flat to 
weaker result in the current 

Results for the five months 
to March were severely affected 
by the yen's appreciation, and 
the parent company reported 
its first operating loss since it 
went public in 1958. 

The deficit of Y6.63bu ($47m) 
for the Irregular period — 
before a change in year-end — 
was a sharp turnabout from 

fpis pi rablf operating pmfiw of 
YlL.l9bn, Sony managed pre- 
tax profits of Yl&Zbn, down 47 
per cent 

The group as a whole showed 
a 56 per cent slide in net pro- 
fits to Yl3J6bn, on a 5.2 per 
cent fall in turnover to 

Overseas sales fell SJS per 
cent to account for 70 per cent 
of the total, while domestic 
sales advanced by 2A per cent, 
attributed to a good showing in 
audio equipment including 
compact disc players. 

For the current full-year the 

parent initially expected a 10 
per cent increase in pre-tax pro- 
fits. However, the outlook has 
dimmed and wnmTwnliKirt'prf 
pre-tax profits are now pro- 
jected at Y30bn, down 18 per 
cent from the level for the year 
ended October 1986, on turn- 
over of YUMObn, down 3 per 

Sony is attempting to counter 
the adverse situation by ex- 
panding its overseas production 
and developing new products. 
In the meantime, directors are 
to lose their bonus payments. 

Fanuc shows plunge in earnings 


FANUC, the world's biggest 
manufacturer of numerically 
controlled equipment for 
ma chin e tools, reported a 42.5 
per cent fall in its uncon- 
solidated pre-tax profits to 
Y33.64bn in the year ended 
March 1987. 

Net profits also plunged by 
32 per cent to Y19.03bn, on. 
turnover of Y118.57bn, down 
30.3 per cent from the previous 
fiscal year. The annual dividend 
is unchanged at Y15 per share. 

Sales of its mainstay com- 

puter numerically controlled 
(CNC) equipment declined by 
29 per cent, electro-dischargers 
fell 25 per cent and industrial 
robots were down 70 per cent, 
while exports fell by 31 per 

"*he steep sales decline was 
attributed to sluggish demand 
from its customers such as 
machine tool manufacturers 
and other industrial machinery 
makers which were also hit by 
the deflationary impact of the 
yen's sharp rise. 

For the current fiscal year, 
the company expects its exports 
will pick up, buoyed by full- 
fledged operation of its overseas 
joint subsidiary with General 
Electric of the US. 

Assuming the yen stays at 
Y135 to the dollar, annual 
sales are projected at Y134bn, 
up 13 p«r cent, pre-tax profits 
at Y3&6bn, up 14 per cent, with 
net profits at Yl&tim, down 4 
per cent from the previous year. 
The annual dividend will remain 
at YZ5 per share. - - 

Steep decline in profits at Fuji Heavy 


FUJI Heavy Industries, the 
major Japanese vehicle and 
machinery group, yesterday 
reported a 51.4 per cent slide 
in its pre-tax profits to Y14B4bn 
in the year ended March 31 

The company said the upsurge 
of the yen’s value reduced 
overall sales by 7 per cent to 
Y715.72bn. With the strong yen 

eroding profits by YBSJlbn, net 
profits fell by 21 per cent to 

Annual turnover broke down 
into Y603.6bn for automobiles, 
down 7 per cent, Y22L38bn for 
machinery, down 17 per cent. 
Y234)5bn for rolling stock, np 
22 per cent, Y28.14bn for buses, 
down 8 per cent and Y3&56bn 
for aircraft, unchanged. 

For the current fiscal year 
ending March 1988, pre-tax 
profits and net profits are 
projected at Y14bn (down 6 per 
cent), and Y8bn (down 22 per 
cent) respectively on turnover 
of Y7lQbn, down 1 per cent 
Fuji Heavy Industries plans 
to increase its capital spending 
to an all-time record of Y7Ihn 
for the current fiscal year. 

AD of these shares having been sold, das announcement appears as a matter of record only 


April 3987 


•-s% * a ■ -i* * - >i i 

r. M 


Class A Common Shares 


This portion of rhe offering is being offered outside die United Scales and Canada by the p n&arsigncd . 

PaineWebber International 

Advest, Inc. Banque Nationale de Paris Banque Paribas Capital Markets Limited 

Barclays de Zoete Wedd Limited 

Union Bank of Switzerland (Securities) 


KJeinwoxt Benson 

Ti mifi d 

Yoxktpn Securities Inc 


Thus portion of the offering is being offered in the United States and Canada by the undersigned. 

PaineWebber Incorporated 

Advest, Inc. 

Bear, Stearns & Co. Inc. Dillon, Read & Co. Inc, A. G. Edwards & Sons, Inc. Kidder Peabody & Co. 


Lazard Fibres & Co, Morgan Stanley & Co, Prudential-Bache Capital Funding 

Morgan Stanley & Co, 


L. F. Rothschild, Unterberg, Towbin, Inc. Salomon Brothers Inc 

Wertheim Schroder & Co. 


BNP plans 

to regroup 
its equity 

By George Graham hr Parte 

PARIS. France’s large** tank, 
is to concentrate 1U principal 
equity holdings in U* «*- 
sMiary, Cempagnte fflnvefr 
tinement de Paris. 

dP wfll ta jointly cod* 
trolled by Banexi, BNP’S 
i nves t me nt tasking offshoot, 
and by Societe Fi nancier s 
AnxSiaire, a 166 per cent 
BNP subsidiary, and will 
regroup the tanking group’s 
equity stake* of over FFrSOm 
($8 Am). 

Mr Ge raid Nouis, president 
of Beaexl, said yesterday that 
dP could also bring in 
other partners from outside 
the BNP group, although the 
structure bad not yet been 

The new holding company 
will have total capital of 
FFr 3bn-4bn. and will take 
over some of BanexPs larger 
holdings such as St Louis 
Bourbon, the food group; 
Sommer AUlbert, the plastics 
and floor covering producer; 
and the Accor hotel chain. 

Banexi win act as one of 
the operational agents for 
OP, which is expected to play 
more of * deeping partner 
role with its stake than the 
investment banking company. 
Banexi usually Omits its 
holdings to a maximum of 
FFr 30m — though some 
have in the past exceeded 
this level — and aims to take 
strategic stakes. 

In 1986. Ban aexFs Invest- 
ments totalled more than 
FFr 200m, but sizeable dis- 
posals left Us total portfolio 
FFr 18m lower at a. book 
value of FFr 740m. The com- 
pany's profits tripled to FFr 
196.5m, of which around 
half was owing to a capital 
gain realised when it sold 
half its stake in Lesfeur, the 
food, company taken, over 
last year by St Louis Bouchon. 

Setback for 
Kmnagai Gum! 

By OvrTotyo Staff 

KUMAGAI GUML the aggro* 
give Japanese construction 
company, reported lower sales 
and p re-t ax profits in the first 
half-year ended March 1987. 
Pre-tax profits fell by 9-5 per 
cent to Y8.97bn with net 
profits reaching Y4.6jhn, up 
<L2 peg cent pyer; a year 

Mid-terih tales d ipped by 
8 per cent (o'dntSIbih: The 
company M«m«d Its. lack- 
lustre Justness performance 
on slack orders for overseas 
construction and red estate, 
which decreased about 80 per 
cent and 40 per cent from a 
yew before, respectively. 
Orders received during the 
half-year fell by 28 per cent 
t» Y386JQm. 

Operating profits deterior- 
ated by 20 per cent 

FaU year pretax profits 
are projected at Y26bu, down 
&4 per cent, and net profits 
at YJUSbn, down &S per 
cent, an turnover of YfiOObn, 
down 49 per cent from the 
previous year. The mnuri 
dividend will be un ch anged 
at Y9 per share. 

ICI Australia in 
A$200m bid 
for drugs group 


Id Australia* the qootod shb« from A 

Industries, yesterday moved to ***** ** * *£“5“**??* 
increase its dominance In the Australian dollar^ devawwosv 

SSSte «£33 I** pow “ loi ! 


(US? 144m) for F. B- Faudinft 1BR« of 
the country*® leading pharma- wme 

ccuticaJs group. through! to to credit- _____ 

IQ Is offering A87A0 for each 

^^rsK&rss warstfrafS 



eoii . ..ijm w m tnuHnc tn be H* Foreign Inwrtiwot Review 

called*" a?* soon as possible." Board, but 

Id director add the two com- at tonga ‘ * 

parties had complementary pro- Is unlikely that JW3I ww*« 
ducts and resources in the praMcms w *1* 
Australian health care industry its British ^ - 23 

and could expand more effeo- Following the .saJe ofa 
Mnaiv tnr r tbrr per cent stake in the comiMiny 

The bid compares with a last Ey* SA Brewing tate 

sale Sriceof ^Tfor nml*Lng FauWing-s maJor^rgMJlder W 

asasgsJS ag.'BtfS ff s. 

Modest after-tax advance 
for AO International 


ACT International, one of Aus- 
tralia’s largest industrial con- 
glomerates, has come through 
a year under siege with a 
modest after-tax profit increase 
and plans to spend more than 
AS200m (US$144m) in Aus- 
tralia in 1987-88. 

The company, which spent 
most of the past year under 
takeover pressure from Mr 
Alan Hawkins’s Equiticorp 
group, lifted aftertax profit for 
the year to March from 
A$869m to ASdS.lm on a turn- 
over . which . was up ’ from 
A$2.1bn to A$2.4bh. 

Directors said the result re- 
flected increased profits from 
overseas businesses especially 
in the US which confirmed its 
offshore investment strategy. 
But considerable in v estm e nts 
were planned at home to the 
current year, - 

Profits from Australian pack- 
aging operations rose by X» per 

cent tn the period while flat 
glass operations IKted their 

contributions by 35 per cent. 

Directors also announced a 
revaluation of the company’s 
land and buildings, which has 
added A99i.Sm to shareholder* - 
funds. A decision win bo madr 
on dividend payment for the 
year on June 5. including the 
extent to which U may be 

franked under Australia's divi- 
dend imputation system. 

The result followed a rise in 
interest provision! from 
A$45.1m to A$fi0.92n, while tax 
was virtually static at A¥83.5tn. 
Depreciation provision rose 
frpm ASI02.6ra to ASlll’ftu. 

However, the result excluded 
a large extraordinary loss of 
A$104.37m compared with a 
ASlS.Sm profit previously. The 
loss was related to a previously 
announced write-off of the im- 
o anortised balance of foreign 
exchange losses on borrowings. 

Jordan bank results mixed 


bulks have reported- mixed 
results for L lira, ^fleeting 
central tank-mandated higher 
provision levels and the con- 
tinued dearth of good new 
domestic lending opportunities. 

The Housing Bank had 
slightly higher pretax profits of 
JD 2.85m (38.6m), compared 
witfi 2.75m the previous year. 
The balance sheet total rose 
from JD 982m to JD 427m. The 
tank distributed JD 122m in 
cash dividends, at 11 per cent 
of par share value. 

Jordan National Bank's 
balance sheet total rose from 
JD 135m to JD 147m and 
operating Income was pp 
slightly, from JD UL5m to 
JD 13.5m, though net profit 
dropped frwn JD 2.04m to 
JD IJSm. it distributed 

3D 1.36m in 15 per cent cash 
dividends, against JD 1.64m the 
previous year. 

The Bank of Jordan, which 
last year bought the Jordan 
operation of Chase, saw its 
balance sheet grow from 
JD 95.6m to JD 126£m. with 
pre-tax profit rising from 
JX> 3~8m to JD 191m. It distri- 
buted 16 per cent cash divi- 
dends worth JD 776.000, com- 
pared with the previous year's 
JD 570,000. 

The Jordan-Kuwait Bank’s 
balance sheet rose from 
JD 128.4m to JD 1369m. but 
net pretax profit declined from 
JD l.6m to JD 1.1m. The bank 
made no dividend payment for 
2986, due to higher provision 
levels and a board decision to 
cany forward the JD 500,000 
allocated for dividends to next 
year's aocounts. 

Associated Japanese Bank 


Extractfrom Audited Aixounts 






aOiOOO : 


Retained Profit 



Subordinated Loans 
(£ equivalent) 









Total Assets 



Rrpfit before Taxation 



Profit after Taxation 



An International Consortium Bank 

2SHK) Comhffl, London EC3V3QA 




Financial Times Thursday May 21 1987 

* h 

r °'Jp 



Body Shop deal clears 
way for US expansion 

4 . „ 


Body Shop International, the 
rapidly - growing, UK - tJtsed 
natural cosmetics products com- 
pany, lias cleared the way for 
expansion into the American 
and Japanese markets with an 
agreement announced yester- 
day to acquire for 3.5m dollars 
** The Body Shop" trademark 
from two ITS companies, Janes 
Store and Madge. 

janes Store currently owns 
the trademark “The Body 
Shop" in the US and Japan, 
and is a wholesale supplier of 
cosmetic products using the 
trademark. Madge is licensed 
to use the trademark on retail 

and mail order cosmetic 

The vehicle for transfer of 
the righto over the trademark 
is to be the creation of a new 
company, Mark Transfer Com- 
pany, which will own the trade- 
mark for cosmetic products in 
the US ' and Japan. The dares 
of Mark Transfer wtti be paid 
for by the allotment of 268,177 
new ordinary shaires of 5p each 
nominal . value of Body Shop 
International. - 

Janes Store will continue 
using The Body Stop name 
until July 1 1988. Body Shop 
International may be obliged 



Date Correa- Total Total 
of ponding for last 

A catos & Hutcheson int 3 
MB : gj 

Avon Rubber int 3t 

Biggerldge Brick 0.75 

Bass int 42 

Blsichi Tin '. 0.73 

Coloroll Group 3.45 

Cramphern* int -j|2.5 

Gartmore Amer Secs 0.8 

Granyte Coating# ... 1.6 ^ . 

Hartwells 2.12 

Irish Distillers int 12 

Leeds Group int 2.7 

Parkland Textiles 3.4 

PWS Holdings int t3.5 

Ranks Hovts int 12,65 

RHP Group int 22 

Tunstall Group int 1 

TR Prop Invest 0.88 

Whitbread 6.4 

payment payment div 

July 27. 
July 15 
July 6 
Aug 11 

Aug 21 

July 31 
July 21 

July 10 
July 10 

July 24 



55 11 


- 5.75 

a 10 


- *1.75 


i 0.65 

5 5 

- 6.17 

1 12 

5 2JL 

S 2.85 

- 7.65 

- 625 

a 42 


- 6.61 

- ' 5 

- 2.43 

l *123 

1 7.8 

Dividends shown pence per share net except Where otherwise 
stated. * Equivalent after allowing for scrip issue, t Go capital 
increased by rights and/or acquisition issues, t USM stock. 
S Unquoted stock. I Dish pence throughout, fl To reduce 


16& 17 June, 1987 
Hotel Inter Continental 

r orkifofwsbonpbasarabjmlhis 
advertisement, together 
your bustaess card, to: 

Conference Organisation 
Mnster House, Arthur Street, - 
London EC4R9AX. - 
or telex 27347 FTCONF G 
fax 01-623 8814 

Anglo United buys 
LCP Fuels 

to buy tiie Madge retail and 
mail order business at Madge’s 
option within the next five years 
ait a price earnings ratio of 81. 
based on the latest results at 
the time. Madge may continue 
using the trademark for five 
years In the San Francisco 

Plans for expansion in the 
US are still modest, with one 
store scheduled for opening in 
New Jersey In the spring of 
1988, and < store at an addi- 
tional location in July 1988. A 
much broader expansion is 
anticipated in future years in 
both the US and Japan. 

Cleves purchases 
Ex-Lands stake 

Oeves Investments announced 
yesterday that it bad acquired a 
142 per cent stake in Ex-Lands, 
the investment company, and 
was seeking discussions with 
Ex-Land’s board over the 
development of its activities. 

Shares in Ex-Lands rose 
sharply, to dose at 80p, up 27p 
on the day. 

A spokesman for Oeves said 
it would be seeking board 
representation and felt it could 
make a “major contribution** 
to the business. But Ex-Lands 
said that after considering the 
approach with its main share- 
holder. Kivahu, which owns 
4329 per cent of its shares, it 
saw no purpose in continuing 
discussions with Cleves, which 
it had terminated. 


Angle United, the opencast 
coalmining group in which 
Hillsdown Holdings took a 29.9 
per cent stake last December, 
yesterday emerged as the pur- 
chaser of LCP Fuels— a part of 
LCP group put up for sale by 
retailer, Ward White, following 
its successful £173m bid last 

Anglo is paying £1125m for 
the Midlands-based fuel distri- 
bution business. According to 
Anglo, the acquisition is part of 
Its planned diversification away 
from the volatile coal extraction 
business and into other energy- 
related areas. 

On a mix of audited figures 
i and management accounts, LCP 
| Fuels made £1.24m before tax 
, in the year to end-March, on 
sales (in a 1 0-month period) of 

£4 1.9m. Net assets at end- 
January were £127m. Also in- 
i eluded in the deal is a small 
coking operation which made 
about £130,000 pre-tax. 

Anglo is paying for the 
, acquisition via a rights ofier of 
112m convertible preference 
shares — offering a fixed net 
dividend of 725p and con- 
vertible on a three-for-two basis 
between 1990 and 2000. 

These new shares will he 
offered to existing shareholders 

on a basis of 10 convertibles for 
every 104 ordinary held. 

Hillsdown has agreed to take 
up its own rights entitlement, 
at a cost of £326m. but two 
Anglo directors who control 
342 per cent of the company 
via two Netherlands Antilles 
companies, will not be doing so. 
and their shares will be placed 
directly with institutions. The 
issue, aside from the Hillsdown 
entitlement, has been under- 

By using convertible stock to 
fund the deal, Anglo directors 
(helped by the friendly Hills- 
down stake) retain control of 
the business without putting up 
new money. 

Anglo is still sitting on some 
£7m cash — the bulk of Hills- 
down’s injection in return for 
its stake— but says it is saving 
this for smaller acquisitions. 

Anglo, which claims to he 
one of the largest open-cast 
mi nin g companies in Britain, 
also announced estimated pre- 
tax profits of £4.5m with earn- 
ings per share at 3.3p in the 
17 months to end-March (its 
new year-end). 

In the year to October 1986, 
Anglo made £3 26m before tax 
on sales of £15.8m. 

Anglo shares were unchanged 
at 58p yesterday. 

Bid on way for GRA 


An agreed offer by property 
company. Priest Mariam, for 
GRA Group, the greyhound 
racing promoter turned 
property company, looked in- 
creasingly likely last night, 
following yesterday's board 
meeting at GRA. 

An announcement will 
probably be made ahead of the 
weekend— either late today or 
on Friday. 

Yesterday, Priest Marians* ad- 
visers, Samuel Montagu, would 
say only that negotiations 
between the two companies had 
reached “an advanced stage." 

However, Mr Simon FusseU, 
chairman of Priest Marians, 
indicated that the property 
company envisaged running 
GRA as an independent leisure 
division within the group, with 

GRA's chairman, Mr Isadora 
Kerman, joining the Priest 
Marians board. 

The current GRA policy — of 
upgrading and developing 
stadia where appropriate — 
would continue, he said. How- 
ever, as time went on and 
depending on land values, 
alternative uses for certain 
sites might be considered. 

GRA shares eased lip to 
122 $p yesterday, valuing the 
company at around £53m. 
Earlier this week. Leisure In- 
vestments — another rumoured 
suitor for GRA— sold part of 
its 5.8 per cent stake in the 
racing promoter, on the 
grounds that the price of the 
company had gone ahead of 
what Leisure thought it was 


- Problems, Progress 
& Prospects 

Paris 9 & 10 June, 1987 


For intormrian phase return &h 
aOVwtfaamanc togottiermOt your 

Financial Times 



Minster House, Arthur Street, 
London EG4R9AX. 
telephone 01-6211355 

telese 27347 FTCONFG. 

fat 01-623 8814 


■Hr f-'. ’ • -V> 

\y lY-V. 

*•"*_ 7. 


Excellent performance by Avon Industrial 

sfc Considerable demand for specialist tyres. 
Efficiency programmes progressing well - 
major benefits apparent in next financial year, 
sfc Confidence in the future. 

^ Increased interim dividend. 

Pre-tax profit 

Earnings per share 
Dividend per share 

4 April 1987 





Hall tear 10 FInanoal year ended 
29 Mach 1986 27 ScpumtMr 1966 
£0005 DXO'a 









Copes of the fuH interim statement can be obtained from The Secretary. 

Avon Rubber p.i.e. 

Bath Road, Metksham, Wiltshire SN12 baa 

To the Holders of 

J. P. Morgan 

Capital Corporation 

4)4% Convertible 

Guaranteed Debentures 
Due 1987 
(Dae June 15. 1987) 

pursuant to Section 3.04(g) of the 
Indenture doted as of Jane 16. 1972 
among J. P. Morgan Overseas Capi- 
tal Corporation.!. P. Morgan & 
Co. Incorporated. Cunranlor. and 
Manufacturers Hanover Trust Com- 
pany, Trustee, that in accordance 
with Section 3.04 of the Indenture 
the conversion price of the Deben- 
tures has been adjusted because of 
a 100% stock dividend from 826 .125 
to 513. 0625 per share of Common 
Stock of J. P. Morgan fc Co. Incorpo- 
rated effective December 22, 1986. 




May 21. 1887 
New York. New York 



(Mwfece RabosMj Kaaiia) 

U. S3 (00.000.000 

Guaranteed Floating Rate Notes 1969 
The Notes wffl be unconditionafly and irrevocably guaranteed by 

The Sumitomo Trust and Banking 
Company, limited 

NOTICE IS HEREBY GIVEN fiat, pmuantio Contfirion 4 (B) of the 
Notes, Mkiebea Co- Led. (the “issuer”) has elected to redeem on 
June 23. 1987 (the “Redemption Date') all of its outstanding 
Guaranteed Roaring Ram Notes due June 1989 (the 'Notes') at 
their principal amount. On and after the Redemption Date, interest 
on the Notes win cease to accrue and unmaaired Coupons wl 
become void. 

The Notes should be presented and surrendered to the Paying 
Agents as shown on the Notes on the Redemption Date with all 
interest coupons maturing subsequent to the said date. 

Coupons maturing on Jute 23. 1987 should be detached and 
presented for payment in the usual manner. 

May 21, 1987, London 

tf. OftMflk. MA. (CSS DvpO. Prindpe Pirn* A|«nr 


' Bank 


• 7 % -k’- 

U £ ***** tfa~ ^ 



Group profit before taxatiem for the half yearended 28 February 1987 . 
amourrtedto£523mOIkwaxnparedwith£402 mflfionforthe 
corre^XH^fing ptokxi of tie prev»usyear~an increase of 315per cent 

Improvements in profits wererecorded in aHofthe Group's continuing 
efivision. where our chocolate, catering supplies, pasta and retail catering 
interests were much improved on the p revious year. Our Far East and 
/saisiralasian businessesalso traded very satisfactonly. 

The mffitng and bread bairingcfMsibnsim^ 

bakery efivision, as forecast being in profit Ourgroceiy and packaged rakes 

drwsiore f c^rab'n^nrao^fottebrandedse(^«bu^oweMr^M^ 



it;- • . 





The Board has decided to pay on 10 July 1987 to Ordinary shareholders 
■ registered atthedoseofbuanesson 19 June 1987 an interim dividend for 
theyearto5 September1987 of 2.65pper Ordinary share, an increaseof 
25 per cent over the sTterim dividend of 2.72p per share paid irt 1986. The 
dividerKJisdMpayableontheOrtfinary shares allotted pursuantto the offer 
for Avana Group pk. 


TheCompan/s brd to acquire Avana Group pic became uncorufrtionaion 

16 Aprill987. As at 18 May 1987 the Company owned or had received 

mi mM- nrrt-inn In -fnt-ilOn Ifinorrenlnf AianafliTlinanicharM' 


amsuui umocwjncvtvi ml jail. I WMI.TII >3 . - — — I — — — 

interests in the United Statesthe profits of meremamkig companies vv»e 

considerably aheadof thepreviousyear. 

rose by16.8 per centtoll.lpper share. 

We are currentlyferreRarisvig ourselves i n more detail with the Avana 
businessesandeailyindlrationsTuliysupportourreasonsforthe acquisition. 


TheGroup continues to trade strongly and has madea good startto the 
seaond half oftheyear. I would therefore expect the yaarasa whoteto be 

Sir Peter Reynolds. Chairman 

Half year to 
28 February 

Half year to 

1 March 

Year to 

30 August 

External safes 



£1/41 4.2m 

Profit before taxation 

£ 52.9m 

£ 402m 

£ 902m 

Earnings per share 


9 * P 


Interim dividend per share 2.65p Z12p 

, Windsor, Berkshire, SL43ST 




Morgan Guaranty Trust Company of New \brk 


9% DepositNotes due 1992 

The jbOowmgkax agreed to punJtaM the DqpoutNoten 

Homan GoABAirrrLro 
BaickotTokyo krEHNAnonAL Looted 

CmMnMliB *m»mpmiyi wn i 

EBC Ambo Bank loans 
Mwinu LtwchIittshhotowal&Co. 

Hnan Cbbcwbu. * Ga Uhheo 


Swiss BAiKCoapaaxnon hmumui Looted 

Buanc Beomnts aCa, Lnmxo 


BarqdsBbosbujsLa»btSJI. . 


n« n wn n iB«mri Hiii.MtmB Lnmm 
The Naaro Sect ; amp CoL.(EuBPPK)Lm. 

aMnfMnlto lih iiim ^ i MiiirMiroi 


Appficatiao has been made to the ConncBafTbe Stock Exchange far the Deposit Nates, hmed at ML5 per cent, pta armed 

interest (if say) in hm ■! H»- A ^ « .nnkii *ir».c nf fl flfin S jt ft] fin^lflfl In he mtmfoteri to fee Qfiyjoj tig tntfi mt nn Ihn 

Deposit Note»wflHiepaya h i rwin ii«ay.ltx: tL« payment b e in g Axon 27th May. 1988. 

I!«rtng P»iTi n i lu ^||r la t i ngtQltlg;r>ff fwwf Mmx imil tlin T ibip j ji ^ - M i f ailihtl ii iii^i |f 

obtained daring usual boon Hp to and mdn din g 26tii May: 1987 than the Company A nonmc a n cga Office at The Sfccfc 
Exdumge and up to nd indncfiagSih Jane, 19S7 bam: 



ftkfnii Guaranty Ifoat 



2ta May 1987 



Unaudited mutts at the group for the six months ended 31 March 1987 

6 months ended 

6 months ended 

Year ended j 

31 March 

31 March 

30 September | 

Not retained brokerage 

Other operating income 
Tradng expenses 

Results of insurance company 
Share of profits of related companies 
Profit on ordhmy activities before tsotion. 
Taxation on profit on ordinary activities 
Pro fi t af ter taxation on ordfaiary activities 
Minority interests ' 

g- - - - —1 ■ * - r« 

tTomariEr vaxauun ana rmnomy troeTwSEw 

on ordinary activities 
Extraordinary items 

Profit attributable to shareholders 


Retained profit 

Earnings p ar share 

Dividend per share tywQ 


10. 8p 





I am pleased to report a 31 per cent growth In pre-taxprofits over the 
comparable period last year to £4. 51 million which reflects the confidence 
expressed at tne time of me merger and a Iso in my statement 
accompanying die accounts to 30 September 1986. Brokerage increased by 
17 per cent ami earnings per share by 37 per cent 
The current weakness of the US dollar against sterling has had a 

significant effect and has reduced brokerage income by approximately 
£600,000. This reduction would have been greater but for tne group's 

policy of hedging its exposure to exchange rates. 

Division have suffered from difficult market conditions and also from the 
weakening U .5 dollar. Both these factors look likely to affect the results of 
this division during the second half of this year. However, the division 
remains highly profitable, and there are now growing s ign s of market 
improvement. We believe it should resume growth in the next financial 


j l m 4 i n >« 

Estates & General 


•f. Gross investment rental 
income up 11.7% to 
£2.5 million 

+ Pre-tax profits up 10.8% 
to record £1.5 million 

+ 12th year of dividend 

-f» Development programme 
of £125 million 

Investment portfolio now stands 
at £39.9 million 

Financial Times Thursday May 21 19S7 


Clay Harris and Mike Smith on Suter’s plans for its new bid target 

Engineering a solution for Mitchell Cotts 

SCR DAVID Abell openly admits 
that Mitchell Cotts war only 
second choice as a takeover 
target for Snter, his engineer- 
ing and distribution group 
which is bidding £74xn for the 
troubled engineer, c o ntractor 
and international trader. 

Until a few weeks ago, Snter 
was focusing Instead on New- 
man Industries, the rivets and 
fasteners group. Newman could 
base increased Sitter’s profits 
by 50 per cent at one fell swoop, 
probably without much repair 
work, according to Mr Abell, 
chairman and chief executive. 

But Wlnterbottom Holdings, 
Australian investment group, 
outbid Suter for a key 26 per 
cent stake, making the prospect 
of a full bid both more difficult 
and probably too dear for Mr 
Abell's conservative tastes. 
Without further ado, he turned 
his attention to Mitchell Cotts. 

That Mr Abell wanted 
Newman more does not mean, 
however, that he now wants 
Mitchell Cotts any less. But, 
If successful, it promises to be 
altogether a different sort of 

Suter is prescribing radical 
surgery for Mitchell Cotts, a 
company which analysts 
described yesterday as faring 
a deteriorating financial situa- 
tion. Sane fear that Mitchell 
Cotts may be prompted to sell 
more assets before the year- 

Mr John Storar, ^fhcheU 
Cotts *Viaiim iin, SMiWBiT iiPd 
yesterday that such sales were 
likely. “It is no secret that 
we have a disposal pro- 
gramme,” he said. “This is 
not a plan that has evolved 
because of a bid situation. This 
is a plan that was already in 

Before the bid, several City 
analysts had reduced their 

-Tax Profits 


profits forecasts for the year 
to June 30. The consensus now 
is £5m before tax, well up on 
last year’s £89,000, but lower 
than the £7m forecast earlier 
and the £10-9m achieved In 


Mr Storar rejected oat of 
hand suggestions that Mitchell 
Cotts might be tempted to use 
pension surpluses to boost its 
profits this year. 

With Mitchell Cotts and its 
financial adviser, Samuel 
Montagu, preparing a spirited 

Suter and Robert Fleming 
its merchant bank, yesterday 
bought Mitchell Cote shares 
in the stock market to raise 
their total stake to liSi per 

Mitchell Cotts, meanwhile, 
repeated that the engineering 
and distribution group's £74m 
takeover bid was “unsolicited 
and unwelcome " and urged 
shareholders to take no action. 

Independent sources sug- 
gested Suter would have had 
no trouble in raising its 

AIB earnings 
advance 20% 

Allied Irish Baida did not 
quite hold the gain reported at 
the half year when pre-tax pro- 
fits showed a rise of 19} per 
cent but the 17.4 per cent im- 
provement from £87m to 
£1 02.1m in the year to March 
31 1987 should he seen In the 
light of the continued recession 
in tiie Republic of Ireland, said 
Mr Gerry Scanlan, chief execu- 

A feature of the results was 
the appreciable rise in after-tax 
earnings up 20 per cent to 
£85.4m, which had shown little 
growth over the past three 
years, Mr Scanlan continued. 
The results represented a 14 
per cent return on average 
shareholders* funds. 

Net operating income had in- 
creased by 11 per cent as com- 
pared to a rise in costs of 8 
per cent. This resulted in a re- 
turn of 0.76 per cent (0.66 per 
cent) on total assets. 

Once again, the contribution 
of the group’s external opera- 
tions was significant, accounting 
for some 52 per cent of profits. 
The US affiliate, First Maryland 
Bancorp contributed $20.4m. up 
17 per cent from the previous 
year. Because of the tell in the 
US dollar, the Irish Pound con- 
tribution was down by IR£lm 
to IR£15.2m. the investment in 
First Maryland is scheduled to 
increase to 51 per cent by the 
end of 1987. 

Activities generally in the 
home market had once again 
been affected by a continuing 
bad debt experience, account- 
ing ter a significant share of 
the overall charge of I&£4&6m. 

Mr Scanlan said activities in 

Northern Ireland and Britain 
turned in good performances 
but in corporate banking and 
Treasury operations, the lend- 
ing market continued to be diffi- 

• comment 

A few hours after Qticorp 
shook the market with its $2ftbn 
debt write-off was not the best 
timg for AIB to he producing 
results and confirming plans to 
take its stake in First Maryland 
Bancorp up to 51 percent With 
FMB's $5Jbn balance Sheet on 
board, the group’s capital ade- 
quacy ratio would slip from the 
current 8.4 per cent to SB per 
cent. This will, by a small 
m a rg in meet Irish 

requirements but If greater 
stringency on adeouacy becomes 
the order of the day in the US, 
AIB may have to consider 
coming back to its shareholders. 
In Ireland (where twotoirds of 
assets are emploved) bad debts 
are still a problem — and one 
which is not compensated for, 
by any rise In credit demand ' 
in a recession hit economy with 
the highest real rates of interest 
in the Western world. Not sur- 
prisingly. therefore, AIB is 
showing more Interest in the 
UK, where Drafts were up 
strongly to I£27m, as the recent 
joint-venture agreement with 
Bryant to develop an 18-acre 
residential site i Sussex indi- 
cates. The shares have re- 
covered from their post-rights 
trough but are unlikely to move 
up much further until the full 
impact of FMB's consolidation 
is clear. 

Big demand 
for Computer 
People shares 

By Richard Tomk i ns 
The mini offer for sale of 
shares in Co m pu te r People, the 
computer staff agency, has met 
with an enthusiastic response. 
It was about 20 times subscribed 
when it closed yesterday morn- 

HOI Samuel, the merchant 
bank sponsoring the flotation, 
said about 25,000 applications 
had been received for a total 
of 34m shares, compared with 
the 1.7m which were on offer at 
230p each. 

Profits double 
at Baggeridge 
Brick midway 

Pre-tax profits more than 
doubled at Baggeridge Brick in 
the six months ending March 
81, 1987, which, the directors 
said, fully justified the com- 
pany’s programme of capital 

On turnover ahead by 50 per 
cent to £6.7m (£4.47m) the pre- 
tax result came out at £l-17m 

against £572^000. 

Trading for the half year had 
been buoyant they said, with 
little restriction on building 
activity. Orders for all the 
company's products were 
appreciridy higher than at this 
stage last time and present in- 
dications were ter another 
successful year. 

An Interim dividend of 0.75n 
(0.5p adjusted) w&l be paid. 
The total payment for 1985-88 
was an adjusted 1.75 q, when 
pre-tax profits of £2J21m were 

A heavy rationing is therefore 
Inevitable. Details will be 
announced today. 

Computer People is the first 
company to have come to the 
stock market using the mini 
offer for sale. Half of the 3.4m 
shares being floated off were 
placed with Institutional In- 
vestors, and the other half were 
offered to the public. 

TKii* iftKUt 







































defence, Mr AbeU yesterday 
spelt out his plans ter what 
amounts to a break-up. 

■Suter would definitely sell 
Mitchell CotK contracting and 
construction operations, source 
of so many problems Is recent 
years. This reflects not only the 
group’s difficulties in South 
Africa and Australia, but also 
Suter’s intention to stick to its 

“We will never have any- 
thing to do with co n tract in g of 
any strt," Mr Abell said. “Even 

if it was profitable, we would 
get out of IL M 

Howard Humphreys, the pro- 
fitable engineering consultants, 
and the Komatsu franchise In 
Western Australia, would like- 
wise go on the block. East 
African tea planations would 
be a long-term sell, but Suter 
would be In no hurry. 

Closer examination would be 
given to the freight forwarding 
buirfhes, and the speciality 
chemicals operation, which con- 
centrates on synthetic pyre- 
thoids, used as insecticide. Mr 
AbeU focuses on the latter, 
especially, as a niche business 
which could stand alone even 
though Suter has no experience 
in the sector. 

These disposals would leave 
Suter wkh its main target; the 
engineering and distribution 
activities, which would fit in 
with its own. 

The disposals would raise 
from £20m to £80m. Mr Abell 
estimated, although the logic of 
toe bid did not depend on these 

The Mitchell cotts bid is 
twice the size of Sitter's largest 
acquisition, that of UKO inter- 
national in March last year. 
That Suter can contemplate 
such a step is a measure of the 
metamorphosis it has under- 

stake in the engineer, con- 
tractor and international 
trader had its purchase not 
been limited by the fset that 
it is not offering a cash alter- 

There were also reposts in 
the market that Bnshiake 
Holdings, a private company, 
had sold some of its 17.4 per 
cent stake in Mitchell Cotts 
yesterday. Any such 
to its holding would have to 
be reported today. Mr 
Noreddin Jlvraj, whose 

family controls aimhlii^, 
would not confirm or deny 
whether any dealings had 
taken place. 

RushUke recently rejected 
an offer for Snter to by its 
stake ter an effective price 
of 70p per share. The trans- 
action would have taken the 
term of a placing ter cash of 
new Snter dares. 

Suter shares lost 12p to 
299p yesterday to value Its 
all-paper bid at nearly TSp. 

gP Tif to the six years since Mr 
Abell quit his job as head or 
FT , Commercial Vehicles so that 
he could make his mark with 
an independent company. 

When he took over in early 
1981, Suter was an unfashion- 
able distributor of hairdressing 
equipment with a market 
capitalisation of £Sm and pre- 
tax profits of about £300.000. 
Today the company Is worth 
£21 Om and analysts expect pre- 
tax profits of £20m. 

Suter still makes hairdressing 
equipment — it now c laims to be 
Britain's leader In the field — 
but its profit earners are 
Searle Manufacturing, which 
mafc^ heat exchangers for 
refrigeration and air condition- 
ing units, and Nationwide 
Refrigeration Supplies, which is 
Britain’s largest commercial 
wholesaler in this field with 23 

Other companies include Cory 
Coffee, office catering supplier; 
dearplas, maker of plastic 
m oulding s for the motor in- 
dustry; and Francis Packaging; 
which specialises in metal con- 

None of these is exactly a 
household na nm* but that does 
not worry Mr Abell, who was 
put off high-flying glamour com- 
panies when as an investor he 
had his fingers burned in 1974. 

“Suter is about good solid 
businesses, preferably with a 
market niche and strong cash 
flow” he says. “If a recession 
comes, we will be protected.” 

Water’s growth has, of course, 
been helped by the City’s high 
regard ter its paper. Partly 
because of toe reputation Mr 
Abell brought with him from 
Leyland, Suter shares have 
constantly been at a premium to 
the rest of the engineering 
sector, and the company has 
been able to make acquisitions 
relatively cheaply. 

All-round growth boosts RHP 


RHP Group, tiie precision en- 
gineering concern, yesterday 
unveiled a 52 per cent increase 
in pre-tax profits to £9 .54m. in 
the six months to April 3 on 
turnover which rose by 12 per 
cent to £87.42m. 

During the 1980s RHP has 
diversified from its core 
business in industrial bearings, 
to move into niche areas of the 
electrical engineering sector. In 
the first half the group enjoyed 
buoyant demand in every area 
off activity, especially within 
the fasteners division and 
Graviner, the fire protection 
business acquired fiua Alle- 
gheny last year. 

The group has new exhausted 
its tax losses and has returned 
to a full tax charge. As a result 
taxation deducted £k5m 
(fl-Slm) team profits and earn- 
ings per share fell to 72p 
(8. Op). On a direct comparison 
with the first half last year, 
however, earnings per share 
rose by lJ5p to 7Ap. The direc- 
tors pronose to increase the 
interim dividend to 2.2p (1.9p). 

Beamings is stiB — just— the 
largest contributor to ear n ings, 
with profits before interest ris- 
ing to £4.92m (£4 -21m). De- 
mand for industrial bearings is 
stfll static, but precision and 
aerospace bearings operated at 
full capacity. 

The electrical division sported 
the fastest profits growth, 
fuelled by healthy demand and 
the first Ml contribution from 
Graviner. Its contribution to 
profits jumped to £4 8m (£28m). 

Fasteners, the smallest 
division, also lapped up brisk 

growth, increasing its profits to 
£359,000 (£291,000), 

Borrowings have been sub- 
stantially reduced and should - 
be eradicated by the year end. 
As a result Interest payable fell 
to £535.600 (£LQ2m). RHP 
received an extraordinary credit 
of £L95m in toe first haH from 
toe sale of surplus land. 

The pace of business has been 
buoyant thus ter in toe second 
half of the year. The group is 
now eager to embark upon 
further acquisitions In toe 
electrical engineering Add. 

• comment 

Time was when toe City could 
dismiss RHP and its '‘boring 1 * 
old industrial bearings. No 
more. Through a combination 
of prudent cuts and shrewd 
diversification the company now 
commands respect ss a broadly 
based— and tightly run— engin- 
eering group. Even its Indus- 
trial bearings are not quite so 
boring any more. By gambling 
with market share tiie group 
is. gleaning reasonable returns 
from a static market, while pre- 
cision and aerospace bearings 
are strained to full capacity. In 

electrical engineering RHP has 
proved what it can do with a 
promising acquisition like 
Graviner, while with fasteners 
It has shown that it can sustain 
long term growth. The City ex- 
pects profits of £23m far the 
full financial year, but earnings 
per share will wilt with the 
surging tax charge. The shares 
fell by 4p to 232ftp In a morbid 
market yesterday, yet analysts 
anticipate farther growth . . . 
especially if RHP adds the fris- 
son of ah appealing acquisition. 

MENT: Net asset value at 
March 81 17L9p (145.7p). Earn- 
ings per share 1988-87 2.35p 
(2.12p). Final dividend 1.4p, 
making L9p (l-8p). For current 
year it is proposed to pay an 
interim dividend of 0.3p to 
reduce disparity with final. A 
one-for-one scrip issue is pro- 

tei respect of the recent rights 
issue 3.25m shares (96.2 ner 
cent) were taken up. Balance 
has been sold in the market. 



l a m ina N ona ■niwuncad. 

Mate— Bffttel » Somoo Pvmlaum 
Syndics to. Castings. Darltand Stamp- 
ing. Hambras Invsstmsitt Trust. High 
Gosfoitb Park. Nu-Swtfl Industries. 
Toshiba Corporation, Trtsfua. Under- 
woods, Whan Investment. 



DavonMi (J. A.} Junilt 

Dobson Park Inds May 28 

National Australia Bank May 28 

TUchtrtia May 27 

Rnsla — 

Bradford Property Trust Juno 16 

Carl ass Caps! and Leonard ... Juno 2 

Ivory and Sims May 26 

Racsl Electronics June 23 

Rssd International ..... June 3 

Sheraton Securities Intnl. ... June 1 
Warn ford Investments May 2fi 


AEGON N.V, established at The Hague, The Netherlands. 

At the Annual Meeting of Shareholders held 
on May 19.1987. the dividend for the 1986 

fiscal year was fixed at Dfl. 1.30 in cash per 
Ordinary Share of Dfl. 5.00 nominal value - 
already made payable as interim dividend - 
and a final stock dividend of 2.496 per Ortfinary . 
Share, chargeable to the tax-free paid-in 
surplus or. at Shareholders' option, chargeable 


As from June 2. 1987, Shareholders will be 
able to exchange dividend coupons nos. 13 
. and 14 of their certificates at the head offices*)* 
: Amsterdam -Rotterdam Bank N.V, Algemene 
3, Bank Nederland N.V, CoOperatieve Centrals 

S, Rartfeisan-Boerenleenbank BJV. Nader- 
ga landsa Middenstandsbank N.V„ Pierson, 
ggj H aidring & Pierson N.V. Bank Mees & Hope 
SgSa N.V, Kredietbank N.V. Brussels, Kredtet- 
ggjgs bank SA. Luxembouraeoise. Luxemburg. 
SgSa Schweizerischer Benkvorein. Zurich and 
Geneva. Deutsche Bank Aktien- 
geseilschaft Dusseldorf. Morgan 
SgggSS Guaranty Trust Company of New Yarlc 
•SSsgS Ltd ^ London, J. Henry Schroder Vifegg 

SgSsSg* & Co. Ltd.. London, and EBC AMRO 
Bank Ltd, London. 

5£3SSS5gi Up to and Including August 27, 

1987. hoklere of Ordinary Shares 
will be able to obtain one new 
gSgSgrasgsa share of Dfl. 5.00 nominal value 
upon surrender of dividend 

coupon no. 13 or 14 from 50 or from 250 
ordinary shares, respectively, which new 
shares will participate folly in the results for 1987 
and subsequent years. Dividend coupons nos. 

13 end 14 rank pari passu. Coupons should be 
sumendered to N.V Nadertandsch Administratis- 
en Trustk an toor; NZ. Voortiurgwal 326-32B. f 

1012 RW Amsterdam. The Netherlands. •' 

The published rates of commission win be 
paid to members of the Amsterdam Stock ; 
Exchange to enable them to exchange 
dividend coupons nos. 13 and 14 without 
charging commission to Shareholders. 

Rights to payment of dividend in the form of* 

O rd inary She res wiH be made available to > 

holders of CF certificates through the 
intermediary Of the institutions acting as 
custodians of the coupon sheets to their share : 
at the dose of business on May 19. 1987. 

Shareholders requesting their bank to 
accept/release securities in connection with ’ " * 
the surrender of coupons will be charged the/ - 
standard feefordeposition/wrthdrawal j 
according to fie schedule of charges of the ! 
Association of Netherlands Bankers c 

(Nederiandse Bankiersvereniging), which is . j 
DfL 50.00 plus Dutch VAT for each transacts < 

The Hague. May 19. 1987 
Mariahoevepiein 50 

AEGON 1 \ : 
Executive El 


Financial Times Thursday May 21 1987 


Leisure boost for Bass 
gives f 147m halfway 

BOOSTED BY a good per- 
formance In its leisure activi- 
ties, Ban raised its pre-tax 
profit by 13 per cent, from 
£1301m. to £147.4m, in the half 
year ended April 11 1887. 

In the group's main activity 
of brewing, drinks and pub re- 
tailing the profit rose from 
£ 121.1m to £133.7m. Sir Derek 
Palmar, chairman, said a growth 
in beer volumes resulted in a 
good performance in the drinks 
and pub retailing business, 

Lager continued to grow and 
accounted 4or more than half of 
beer sales. 

Contribution - from leisure 
moved ahead from £8.4m - to 
£15. 4m, with particularly good 
results in Coral Baring and 
Crest Hotels, both at home 
and abroad; The amusement 
machine business, however, did 
not achieve the same level of 

On prospects he said the 
second half had started well. 
He looked forward to continu* 

Sir Derek Fabsur, chairman 
of Hass 

ing growth for the remainder of 
the year. 

Sir Derek also announced his 
impending retirement from the 
board. He will leave on .Septem- 
ber 30 and become president 
Mr Z. Prosser will take the post 

of chairman and chief execu- 

Turnover for the group in 
the six months totalled £U>lbn, 
compared with £L37x,i the year 
before. Brewing, etc, provided 
£L13bn (£l-05bn) and leisure 
£S80.3m (£321fl5m). 

Earnings for the period rose 
to 29.4p (25.5p) and the 

Interim dividend is increased 

to A8p net (4J2p). 

There was an extraordinary 
credit of £13.9m this time, 
relating to surplus on disposal 
of the UK -holiday centres 
together with the release of 
reorganisation costs provision 
no longer required. 

Costs incurred jn holiday 
centres to date have been 
charged to operating profit 

Since the end of the half year 
the company's bid for Horizon 
Travel had become uncon- 
ditional. Terms will be satisfied 
by the issue of not more than 
7.6m Bass shares, representing 
2.3 per cent of the gristing 

See Lex 

Whitbread ahead 16% for year 

AN INCREASE of 16. per cent 
in pre-tax profit for the year 
ended February 28 1987 is re- 
ported by Whitbread and Co. 
The directors said this was very 
satisfactory in view of the lack 
of growth in the UK beer mar- 
ket and depressed market for 
wines and spirits in the US. 

The profit came to £15&Bm 
(adjusted £1 36.8m previously) 
and represented the 12th con- 
secutive increase. And for the 
current year the opening 
months were encouraging in ail 
sectors of the business, said Mr 
Samuel Whitbread, chairman. 

For the future be' was confi- 
dent that the development 
strategy was on course to pro- 
duce good results again this 

Turnover at £L55bn showed 
only a marginal improvement 
over the 1886^ figure, which was 
adjusted to exclude the 
majority of turnover from UK 
wines and spirits following the 
formation of European Cellars . 
with AlHed-Lyons. Including 
that would have given an in- 
crease In turnover of 8 per cent, 
the chairman stated. 

Of the £188.3m (£174.0m) 
operating profit 48 per cent 
came from brewing and whole- 
saling, 37 per cent from retail- 
ing and 14 per cent from wines 
and spirits. 

A . break-up shows: brewing 
and wholes aling of beer £92.4m 
(£83.130); managed outlets, 
restaurants, leisure activities 
£B9.4m (£55Jhn); wines and 
spirits and soft drinks £28-5m 

The UK beer market rose 
only marginally last year but 
Whitbread's ale and lager 
brands outperformed the indus- 
try, the chairman said. In addi- 
tion the performance in the 
take-home trade was a record 
and trade through its own pubs 
was very buoyant 

The year was anticipated to 
be difficult for the US wines 
and spirits Industry, but trafie 
was even tougher than ex- 
pected. Despite that the North 
American key brands gained 
market share. 

Both the Californian wine 
interests were progressing 
welL Whitbread North America 
remained optimistic about its 

ability to continue to perform 
ahead of the market 

The chairman was also 
pleased with the results from 
the retail operations where 
profits improved by 24 per cent 
Whitbread had Invested heavily 
in retail outlets in the past few 
years and those would provide 
continuing growth. 

Last year the company 
opened a total of 110 new out- 
lets, mainly Beefeater 
restaurants. Pizza Huts and 
Thresher’s shops. In addition 
it refurbished 320 managed 
houses and improved 35C 
tenanted. That Investment pro- 
gramme would continue over 
the next few years. 

The years’ profit was struck 
after net interest payable 
£33.3m (£40-5m). After tax 
£48. 7m (£36. 9m), share owner- 
ship scheme t2m (£L5m). 
minorities £L5m (£0JSm), and 
extraordinary credits £lm 
(£1.6m), the attributable profit 
came to £107.7m (£99.5m). 

Earnings were 26.61 p (24B9p) 
basic and 2&27p (24. 5p) fully 
diluted. The final dividend is 
6.4p for a net total of 8.9p, 
against 7Hp. 

calls for 
£52m to 



Arlington Securities, the fast- 
growing property developer 
specialising in hwHwp— parks, 
yesterday announced a £52.4m 
one-for-two rights issue, along 
with the exchange of contracts 
for the purchase from Electri- 
city Supply Nominees of the 
Aztec West Business Park, near 
Bristol, for £33m cash. 

The rights issue comes just 
weeks after Mr Robert Maxwell 
sold his 16 per cent stake in 
Arlington to the Kuwaiti Invest- 
ment Office (KTO). The KIO 
and Electra Investment Trust, 
which holds 5.4 per cent of the 
company, have indicated inten- 
tions to take up their entitle- 
ments under the issue. 

Up to 26.35m new ordinary 
shares will be issued at 210p 
-jacb. Arlington’s shares yester- 
day fell by 7p to close at 243p. 

Net proceeds of the right! 
issue would be used to finance 
the purchase of the site. Ar 
additional £8m would be used 
for further development of 
Aztec West, while the remain- 
ing £» -4m is to be working 
capital for the company’s con- 
tinued expansion. 

At the end of 1986, the 
''roup's existing capital basr 
■food at £2 5.7m, with total 
'evelopment costs of the part- 
nerships in which the group was 
in equity partner, at £108.8m. 
Vhe company said the additional 
onds raised would enable it to 
Sorrow funds more easily with- 
out recourse to financial part- 

Forty-three acres of the 157- 
icre Aztec West site have been 
developed, with a current 
mnual rental income of approxi- 
mately £L6m. Planning consent 
has been obtained for develop- 
ment of a further 80 acres. 

Arlington’s shares were origi- 
nally floated on the market in 
May 1986, at an offer price of 

garden centre operator): Pre- 
tax profits £84,542 (£22^70) on 
turnover of £6 -87m (£6 .31m) for 
six months to January 3 1987. 
Interim dividend 2.5p (1.667n), 
partly to reduce disparity. Earn- 
ings 3.77p (1-lSp) per share 
after tax of £30,000 (£6,000). 

Terry Dodsworth on the future of a leading British manufacturer 

GEC moving through the gears 

THERE IS nothing like a good 
corporate story, laced with a 
hint of radical change and 
featuring a strong personality, 
to capture the attention of the 
City. And what better for such 
an optimistic tale than Lord 
Weinstock’s General Electric 
Company, short on fresh initia- 
tives for many a year, yet boast- 
ing Britain’s most celebrated 
industrialist at the helm? 

In the last few weeks, it has 
been impossible to misss the 
buzz of the City’s uewly-aggres- 
sive sales teams disbursing a 
bullish new line on GEC. Add 
a touch of takeover speculation 
and investors have had a potent 
brew to digest: until the rumour 
was officially denied yesterday, 
the punters were backing a sug- 
gestion that Lord Hanson, Bri- 
tain’s premier predator, might 

be stalking the group. 

The result has been one of 
the most vertiginous rises in 
GEC's share price in recent 
years. Until the shares dropped 
back on Hanson Trust’s state- 
ment yesterday, they had regis- 
tered a 20 per cent increase 
from just under 200p at the 
beginning of this month to 
aver 240p. puttin gthe stock 
back close to its all-time 
nominal high of five years ago. 

At least half a dozen of the 
big City investment houses 
have come up with positive 
re-appraisals of GEC since 
early May. County Securities, 
for example, produced a note 
which suggested that there 
were “some encouraging signs 
that GEC ma ybe prepared to 
make important changes.” 

Prudenti al-B ache, in a more 
sweepingly optimistic review, 
said that the last five years 
had seen a transformation of 
the company’s technology and 
market base,” and stressed that 
relations with the Government, 
adrift for over a year, were 
being repaired. 

And Kleinwort Grieveson 
added that there was “now a 
more adventurous spirit at 

There is little doubt that 
analysts producing these reports 
have found a number of sym- 
pathetic listeners among institu- 
tional shareholders. Many fund 
managers seem to feel that the 
stock was due for a re-rating, 
putting it In the 220p to 250p 
pricerange, because the price 
had slipped too much on the 

But what is the evidence that 
a new GEC is now beginning to 
emerge from the last few lack- 
lustre years? How far has it 
recovered from the culminating 
embarrassment of last year’s 
two heavy setbacks— the Mono- 

.7 'i . -JU. y f : 

■ i" 

? V- ' V 


Lord Weinstock, manag ing 

director of GEC 

polies Commission rejection of 
its bid for Flessey. and the 
loss of the Ministry of De- 
fence contract for the Nimrod 
airborn early warning system? 

First is a flurry of small take- 
overs in the last few weeks 
which suggest that GEC is be- 
ginning to aim again for 
non-organic growth by spending 
some o£ its notorious cash 

Three deals have been an- 
nounced in the space of about 
two months, and executives are 
promising more. None of them 
is lar*e, but they suggest that 
if GEC cannot land one big 
prize with a knockout blow, it 
will follow a more patient 
approach of smaller transac- 
tions and collaborative agree- 
ments to reinforce its present 
business spread. 

They include a new joint 
venture with Philips of the 
Netherlands in the medical 
diagnostic equipment field, a 
deal that will involve the ex- 
penditure of between £150m 
and £200m; a £6m agreement 
to buy into Berkel. the Dutch 
weighing machine company, in 
a move which will make GEC’s 
Avery division one of the 
largest in this field in the 
world; and another £I6m on 
Micro Scope, a software com- 
pany which will complement 
the video text activities of the 
group’s computer division. 

Second, there is a suggestion 
that GEC may make a signifi- 
cant investment in the US 
avionics industry, a business 
sector which still inspries 
enthusiasm in London despite 
the recent checks in American 

1982 83 84 85 86 87 

defence spending. 

In particular, the UK com- 
pany, along with other potential 
bidders, is looking at the aero- 
space activties of Lear Siegler, 
a rambling Californian group 
which was taken privately 
recently, and which is now sell- 
ing off assets. 

Third, some investors argue 
tbat most of the bad news about 
the grou pis out. In aprticular, 
they say, it ought not to suffer 
any more heavy setbacks from 
Government spending depart- 
ments, where its legendary 
touch has seemed to desert it 
over the last year or so. 

Fourth, there are indications 
that GEC may be beginning to 
generate results from is 
attempts to disseminate tech- 
nological information acorss the 
group and gain an additional 
edge in marketing by co-ordi- 
nating divisional activities. 

This would respond to the 
criticism the company has 
achieved none of the benefits 
of integration that are generally 
seen to be at the root of the 
strength of the integrated 
Jaapnese electronics groups. 

Finally, some analysts con- 
tend that Lord Weinstock, after 
a period of seeming jaded with 
the company, is now concentrat- 
ing fully on the business again. 
Apart from operational issues, 
top management has certainly 
become more sensitive to the 
investment community, and 
strong hints of an improved 
dividend are In the air. 

“If the company's weakness 
over the last five years has done 
nothing else, it has drawn its 
attention to the existence of 

shareholders.” says one institu- 
tional holder. 

This all adds ap to a story of 
tantalising signals about the 
future rather than any clear 
evidence that the watershed has 
been passed in the company's 

No one, for example, is sug- 
gesting a totally radical change 
of direction of the sort that has 
been pushed through at General 
Electric, GEC’s virtual name- 
sake in the US, where Mr Jack 
Welch has ruthlessly pruned 
the consumer electronics manu- 
facturing division and pushed 
into service areas. 

Nor is the City convinced of 
a big profits rebound, although 
some analysts are forecasting 
earnings growth of between 20 
and 15 per cent over the next 
two years — a few percentage 
points over the average expec- 
tation for industry. 

On the takeover side, as well, 
it is by no means clear that in- 
vestors have much hope of any 
immediate gain. Even though 
some investment bankers un- 
doubtedly think that a success- 
ful bid could be engineered, 
many remain to be convinced. 

"Because of GEC’s size, it 
would be likely to be a lever- 
aged bid, and the UK market 
does not take kindly to that." 
says the fund manager of ono 
of tbc large UK institutions. 
” And where is the industrial 
logic? Who is going to manage 
that business better, when it has 
already been squeezed man- 
agerially to the ultimate 
degree? " 

This response underscores 
both the widespread sympathy 
for the company which lingers 
on in some institutions, and the 
fact that the company's mo in 
backers are looking for steady, 
tightly- managed recovery, 
rather than fireworks. 

Fund managers who were 
around in the 1970s have not 
lost their conviction that Lord 
Weinstock remains among the 
best managers in Britain. 
Younger investors, after the 
last five years of under- 
performance, are understand- 
ably less sanguine and im- 
patient for change. 

But a little solid earnings 
growth would undoubtedly do 
wonders for the conviction of 
the faithful— such as, for 
example, the fund manager 
who, over a period of 25 years, 
has made a net cash invest- 
ment In GEC of only £6m by 
trading in and out of the stock 
at the right time, and is now 
sitting on shares valued at 

sR Pre-tax profit up 52% 
Interim dividend up 16% 
sR EPS (fully taxed) up 24% 

Interim results for half year to 3 April 1987 





Profit before interest 



Profit before tax 



Earnings per share - 

fully taxed 

^restated to exdude ACT written back (actual 8.0p) 



Interim dividend 



Analysis of sales and profit 

Copies of the Interim 
Statement may be 
obtained from the 
Secretary PO Box 20, 
High Street Billerica^ 
Essex CM12 9XY! 


Group pic 




Sales Profit 

Half year 

Sales Profit 


46.0 4.9 

44.9 4.2 


38.5 4.8 

30.2 2.8 


2.9 -4 

2.6 .3 

77.7 7.3 

Whitbread & Company PLC announces 
another outstanding year of achievement. 
Highlights of the financial year ending 
28th February 1987 include: 

O Profits before tax up to £158-9m, an 
increase of 16-2% on last year. 

■Total Dividend of 8-90 pence per share, 
up 14*1% on total dividend last year. 

B Over £200 million capital investment. 

Whitbread opened, on average, more 
than 2 new retail outlets, mostly restaur- 
ants, off-licences and hotels', each week. 

Wfe opened refurbished Whitbread pubs 
at the rate of nearly 2 per day. 

■Rapid expansion in retailing - retail 
profits up 25%. 

Profits from Whitbread’s 1,500 man- 
aged pubs and from the distinctive retailing 
concepts such as Beefeater Restaurants, 
Pizza Hut, Threshers and Country Club 
Hotels all showed significant growth. 

■Increased UK beer market share. 

Lager sales now account for 49% of 
Whitbread’s own beer sales in the UK. 

Heineken showed continued growth 
and Stella Artois outperformed the 
competition in the premium lager sector. 

Ale brands, particularly Flowers and 
"Whitbread Best Bitter, increased share in a 
slightly declining market. 

■ Wines and spirits gains. 

Whitbread's wines and spirits per- 
formed weU in Western Europe and increased 
share in the difficult US market. 

“The new investments we are making in 
the business are considerable and the 
prospects for growth are extremely 
encouraging! 1 P / < 

UfllM/v wUA/ht X . ■ -A— 3 





Financial Times Tfcawdity May 2* 5087 


Avon shares jump as profits double 


Avon Rubber, the tyres and 
industrial polymers group, 
yesterday watched its share 
price surge by 31p to SlOp when 
Interim profits surpassed the 
City's expectations by doubling 

from £2.3Sm to £5.36m. 

In the 1980s, Avon has staged 
a remarkable recovery by steer- 
ing itself out of losses, through 
a series of cuts and re-direction 
towards specialist tyres and 
industrial polymers. Mr Tony 
Mitchard, chief executive, des- 
cribed the half year as 
“ another important stage in 
Avon’s development” 

During the six months to 
April 4, Avon's turnover rose 
modestly to £103-8m (£101. 66m), 
but the continuing businesses 
sported underlying growth of 
15 per cent. 

Operating profits Increased 
to £S.16m (£5.69m) and profits 
from related companies to 

£240,000 (£239,000). Deprecia- 
tion was depressed by the 
divestment of Avon Lippiatt 
Hobbs to £1.52m (£l.96m). 

Industrial polymers emerged 
as the largest contributor to 
profits, its performance was 
boosted by contributions from 
new defence contracts and sales 
to Pakistan and Kuwait. Mr 
Mitchard said these orders 
would cot be repeated in the 
second half, but that he had 
“ high hopes ” of repetition 
next year. Avon is now con- 
sidering acquisitions in the US 
and France. 

The tyres division benefited 
from reorientation towards 
niche areas of the market. The 
refurbishment of the Motorway 
group has begun. Avon is re- 
furbishing 50 of its 200 units 
and expanding the services pro- 
vided by the rest. 

Infla tables progressed because 

of improved sales and 

The proceeds of the rights 
issue, together with higher 
profits, reduced interest pay- 
able to aJBm (£1.58m). The 
company has now exhausted its 
tax credits and taxation rose 
to £1.72m (£270,000). Nonethe- 
less, earnings per share rose to 
22.8p (14p) and the board pro- 
poses a dividend of 3p (£.5p). 

Avon's “ efficiency " pro- 
gramme is on schedule, the 
cost is an extraordinary item of 
£2 .26m (£835,000). Buoyant de- 
mand bas enabled the company 
to save 150 of its proposed job 

Mr Mitchard said that he was 
“ confident ” about the pros- 
pects for the full financial year. 

• comment 

Avon Rubber looks like the 
paradigm of a recovery stock. 

Years of stringent cats and a 
switch from the mass market 
into clearly defined niches read 
like a text book formula for 
industrial recovery. Zt is only 
since the start of the year that 
the City has realised the extent 
of Avon's revival. The share 
price has raced ahead and. 
luckily for shareholders, profits 
have followed suit. With Him 
in prospect for the present 
year, even a return to the ranks 
of the tax payers will not 
dampen earnings per share 
growth. The shares sow com- 
mand a prospective p/e of 13. 
But the full benefits of the 
efficiency programme have yet 
to come to fruition, there is 
lots of potential for new poly- 
mers contracts, even Motorway 
offers scope for margins 
growth. Notwithstanding the 
recent rise ... the shares have 
further to go. 

for Granyte 

From little changed turnover 
of £12. 5 9m (£12. 48m) in the 
year ended February 27 1987, 
Granyte Surface Coatings in- 
creased its pre-tax profit by 13.5 
per cent, from £1.2 6m to £ 1.43m. 
The dividend is lifted from 2.1p 
to 2.5p net with a final of 1.6p. 

The group, which is quoted on 
the USM, makes and sells sur- 
face coatings. The directors 
reported that order book for 
the first quarter of the current 
year was healthy and they were 
confident of another satisfac- 
tory year. 

They had granted a manufac- 
turing licence to a Scandinavian 
manufacturer for the range of 
joinery products. 

They were also examining the 
possibility of a joint venture on 
the continental mainland with a 
company operating within the 
EEC, where the market for 
Granyte's products was five 
times that of the UK. 

The . company was also 
developing a new range of pro- 
ducts for which it bad sole UK 
manufacturing rights. 

In the longer term the direc- 
tors said they would like to 
see the company developed in- 
to a more broadly based special- 
ist surface coatings group. 

Henry Barrett valued at £14m 


Henry Barrett, a Bradford- 
based structural engineer and 
steel stockholder, Is coming to 
the stock market through a 
placing which will value the 
group at £1 3.88m. 

N. 3J. Rothschild, merchant 
bank, is placing 5.64m. shares, 
representing 31 per cent of the 
enlarged equity, at 77p each. 
Broker to the issue is Fanmure 

Barrett has three diivsions. 
One designs and builds steel- 
framed buildings for industry 
and commerce, another pro- 
cesses and distributes steel, and 
the third makes a multi-purpose 

hook bolt used in steel build- 
ings, called the Lindapter. 

The steel buildings operation 
has developed a speciality in 
design-and-build services for 
edge-of-town retail develop- 
ments, and also builds distribu- 
tion warehouses. 

Barrett is a fepaily business 
dating back to 1866. It is 
headed by the great-grandson 
of the founder and there are 
four Barretts on the board. 

Several of the directors — • 
including two of the younger 
Barretts — are new to the 
hoard, and the company says 
much of its recent profits 
growth is attributable to this 

influx of more professional 

The prospectus shows pre-tax 
profits rising from £96,000 in 
1982 to £1.3 6m in the year to 
last August and the company 
is forecasting at least £1.75m 
for the current year. The 
prospective price/earnings ratio 
is 12.2 and the notional gross 
dividend yield is 5 per cent 

Of the shares being sold. 
1.6m are coU-zkg from ^Tiering 
shareholders and 4.04m are new 
shares being sold by the com- 
pany. Proceeds to the com- 
pany will help repay borrowings 
incurred in making recofat 

Leeds Group up 44% midterm 

EXCELLENT progress from all 
divisions and a contribution 
from an acquisition enabled 
Leeds Group to lift its pre-tax 
profit by 44 per cent from 
£ 1.06m to £1.52m, in the half 
year ended March 31 1987. 

This was achieved on a 40 
per cent increase in turnover 
to £9£8zn (£7m). Walsden 

Printing Company, specialising 
in woven and knitted fabric, 
was included for four months. 

The interim dividend is lifted 
from 2.25p to 2.7p net There 

is to be a one-for-five scrip issue 
and the directors Intend to 
maintain the final on the higher 

The wider sphere of produc- 
tion enabled the company to 
concentrate on those areas 
which experienced strongest 
demand, and the outlook for the 
second half continued to be 
promising, the directors 

Walsden was producing 
results tip to best expectations 
and a major capital expenditure 

programme was being imple- 
mented to increase printing 
capacity and improve efficiency. 
After that further development 
would be made In the dyeing 

Non-textile activities con- 
tinued to grow strongly and 
investment was planned in 
Leeds Leasing over the next 12 

Earnings for the half year 
worked through at 12djip (9p) 
after tax charged of £981,000 

-This announcement appears as a matter ef record only' 


Richard Ellis 

VlXANf ! A I , SKRVK't : .S 

announce the formation of the 


a fund to provide up to 


of finance available for property development 

Equity investors 

Barclays Bank Pension Fund Slough Estates pic 

Creditcoip Limited London and Manchester Assurance 

Co. Limited 

Retained property advisers 
Richard Ellis 

Debt finance for 
approved developments 

arranged by 

Barclays de Zoete Wedd Limited 
as agent 

Provided by 

Bank of Tokyo International limited Barclays Bank PLC 

Barclays de Zoete Wedd Limited Kleinwort Benson Limited 
Postipankki (U.K.) Limited Security Pacific National Bank 
The Sumitomo Bank, limited The Toyo Trust and Banking Co., Unite! 

May 1987 

Tunstall up 
19% and 
set for 

more growth 

Tunstall Gro up, ma ter of 

emergency communications 
equipment and Liuglar 
»i«rrTx, produced > 19 per 

cent improvement In pre-tax 
profits for the six months to 
Match 31 last to £2.76m on 
turnover slightly ahead from. 
£12.1m to £l2£m. . 

Mr Michael Dawson, chair- 
man, said another period of 
growth had set the company 
on coarse for greatly Im- 
proved full year results. 

Tunstall Telecom bad 
again taken full advantage of 

its continuing investment in 
product development, he 
said, and Piper Compact, 
Lifeline and Network Con- 
troller bad Increased sales, 
with a farther 24 control 
centres being Installed in the 
first half of the year. 

New products to be intro- 
duced should further en han ce 
the company’s market lead, 
and the board expected 
significant growth from Its 
exsort markets. 

Tunstall Lifeline results 
were encouraging, and the 
division was now strong 
enough to stand in Its own 
right Its headquarters were 
being established at Cleve- 
doo, with new senior manage- 
ment in place and the mies 
force being expanded. 

Tunstall Security had 
emerged as a market force 
and beginning to realise ex- 
pectations, he said. New 
management, new products 
and an expanded sales team 
were all in place, and the 
recently released digital com- 
municator and three zone 
panel were already in great 

The recent acquisition of 
Ademeo gave the company a 
direct channel of distribution 
to customers, an entry Into 
the fire alarm market, an 
expanded product range and. 
opportunities for rationaUm- 

Net interest receivable rose 
from £7,000 to £131,000. After 
higher tax of £L12m 
(£934,000), earnings per 
share rose from to lOJp. 
Directors declared an interim 
dividend of Ip, compared with 
0.8p last time. 

• comment 

When the two Davids 
launched the Alliance mani- 
festo on Monday, alarm bells 
began ringing all over 
Tunstall. Last year the com- 
pany spent more than £300,000 
advertising its Lifeline emerg- 
ency warning system to the 
southern portion of the 6m 
elderly .living on their own 
in the UK. And now not only 
have the boys In yeQow used 
the product name for the 
heading of the section on the 
elderly, they have as good as 
promised to provide one in 
every home. This scale of 
marketing success may still 
be some time off but with Us 
competitors — Modem Alarms 
and Scantronic among others 
— slow to move in, Tunstall is 
looking to rapidly build up 
the rental stream from this 
area. At the moment about 
509,000 people are covered by 
the company’s established 
alarm products, enabling the 
care and maintenance side to 
become a significant contribu- 
tor. For the full year film 
could just be possible, which 
puts the shares at 38Sp on a 
prospective multiple of 17 — 
surely too far above the elec- 
tronics sector’s average for 
investor comfort. 

Reliant reduces 
halfway loss 
to £29,000 

Reliant Motor, vehicle manu- 
facturer, has reduced its pre- 
tax loss for the six months to 
March 31 from £195,000 to 
£29,000 and expects to show a 
profit in the second half of 

Mr John Nash, chairman, 
said the company was in talks 
about possible diversification, 
and was expected to resume 
dividend payments in 1988. 

The group's fall in turn- 
over was attributable to the 
completion of the Ford RS 200 
rally car programme, he said. 
The transfer of Reliant’s 
spare parts operation to Uni- 
part had been completed, and 
benefits should show through 
in the second half. 

The Simitar depended on 
the North American market 
for its ultimate success, said 
Mr Nash. A new subsidiary, 
the Scimitar Motor Company, 
will be formed and sold with 
the necessary finance to 
develop the car. 

Turnover fell from £7.75m 
to £6.63m. There was again 
no tax charge, and thd lou 
per share worked but at O.Sp, 
compared with 3.5p last time. 

Halifax Building 

Boating Rate Loin Notes 1996 
For the three month period from 

20th Februaiy 1987 to 20th May, 
1937 tbcKotetwriQ bear buemt at 
die rue of lOfy* per cent, pa* 
ann sun. The Coupon amounts wffl 
be EI3L82 per £5,000 Note and 
£1316-24 per ESQOOONote, payable 
on 20th May, 1987. 

Morgan Qmtfe£ 

4t Co. limbed* 

V Ag mB an t J 


Parker Pen returns 
to profit at £14.3m 
and seeks listing 


we see the blue sky tor expifi- 

Sales in Latin America, from j 
factories In BraxiL At gen tins- 
Mexico and Colombia, rose from 
£14. 8m to £19m, and provided 
the croup with dividends of 
£L3m — the first profits from the 
region for several years. 

Turnover in Europe rose 1“ 
per cent in sterling terms, 
resulting in a £7m Increase in 
Mr Jacques _Margzy, _cm« oneretias Income. The only 


PARKER PEN, the company 
bought by management from its 
US parent tost year, has been 
brought back into profit and ifi 
to seek a London Stock Ex 

fhan gq listing. 

The company turned in pre- 
tax profits of £l4£9zn for the 
12 months to February 28, com- 
pared with a £300,000 loss in 
the previous year, on turnovez 
up from £11 5m to £1 28.7m, 

Mr Jacques Margry, chief 

A luting would fulfil a com- 
mitment to the investors which 
backed the buy-out, he said. 
Lazard Brothers, the merchant 

Drawers, me mercaam j 

bank, and stockbrokers Caw- 

ing competitor in France. 
Parker recently sold its 12 per 
cent stake in the French com- 
pany to Gillette, which now 

nave have 

been appointed 

Parker produces about 50m 
ivisers. pens a year, mostly in Sussex. 

it claims brand leadership m 
The moat striking improve- world market 

for instruments costing more 

meat was made in the US, 
where an operating loss of -- __ 

39.1m in 1686 was turned into than £2- 
a profit of 81J2m- Sales rose 

10 per cent during the year. accounted lor -- - - - - - . 

Group headquarters was ™*t *»les. 40 eent of 

moved from the US to New- wl« by value 

£2-£3 pens 

accounted for 65 per cent of 

haven in Sussex at the time of 
the buy-out, resulting in a 
reduction of staff from 140 to 
26. The US workforce has also 

The 5100m buy-out, signed in 
February, 19S6, followed five 
years of poor results. With 
almost three-quarters of its 

zo. xne us» worinorce ua* mau - 

been reduced, and new working sales overseas and the dollar 
practices have been accepted. relatively strong* 

Marketing policy has been profits bad suffered on transla- 
changed to move the brand back tion into US currency. 

up-market in the US. Mr 
Margry claimed Parker was now 

The brand also waned is its 
home market as the former 

ZSOS&SiittT™* dement “negated its 
US rival, although Cross was quality criteria and tried to 

stW ’dominant in the quality compete against Imports 


pen trade. Sales of tile 
Classic range, which competes 
directly with Cross, increased 
15 per cent last year, he said. 

cheap, throwaway pens. 

After the buy-out the former 
parent was renamed Manpower 
to reflect its main remaining 

i per cent iasi year, oc shuu. — ------ -- 

“ We have got a viable bus!- interest in temporary help agen- 
ness in the US, and that’s where dies. 

over £6m 
after strong 
second half 


?6.!2m In the jwr to* 0 * 
February compared **» * 

** rtmpanV 


hhcbrr £S28.63m tttl2,91m1 
fm vehicle dirtrlbopt ton sod 
a lower £43.7 5» 
from the hntiof ■eretrea 

^ Hartwell 1 * properly hww 

for Ibr year amennud f* 
C5S6.W9 tompan-d wnn 
£281.009- Thht reflected tb* 
phased compiriion deretop- 
fnects referred to i« previous 
statements- • . 

Mr Frank StixMon Hat- 
gtu, chairman, said the revolt* 
Ktas it was against a bark- 

X roimd of competitive trading 
■wd internal disruption 
caused by the company* 
going property redevelopment 
programme, was encouraging. 

The directors aro reeom- 
mendlsg on increased final 
dividend of 2«12p 
making a total forth* year 
3p (2.S5P). This Will be gatd 
from lower earnings 
( 7 jip) per ahare. The direc- 
tors are also proposing * one 
for three «rlp heme. 

Looking ahead the chair- 
man said the company was 
well placed for the coming 
financial year with good pro- 
fits achieved in March and 

A He ‘added that the change 
In the company’s name from 
Hartwells Group together with 
the new corporate livery »nu 
logo were the atari of a drive 
to Improve the company’s cor- 
porate identity and unify iu 

The Financial Times is proposing to poblish a Survey on 


Publication date: MONDAY JUNE 22 1987 

The following subjects will be covered: 

L Gold 2. South Africa 
3. Platinum . : 4. Silver 

5. Precious Metak Trading 6. Gold for Private Investors 

7. Gold shares 

For further information on advertising, please contact: 

Daniel Russell. 

Financial Times, Bracken House 
10 Cannon -Street, London EC4P 4BY 
Tel: 01-248 8000 Ext 4X81 Telex: 883033 F1NT1M G 

The content size and publication dates of Surveys in the Financial Times 
are subject to change at the discretion of the Editor 





^SS 7 








She! HIob 









£1 72.0m 

£11 4 -2m 


Profit before taxation 

£36. 9m 

£3 1.2 m 


Profit after taxation 

£3 1.6m 



Earnings per share 




Dividend per share (net) 




"adjusted tor 1 far 5 scrip Issue in January 198? 


The Agriculture, Food and Related Industries 
Division contributed £31.3m pre-tax profits on turnover 
of £1 03.9m. Geographical market expansion has con- 
tinued in Western and Eastern Europe and the Far East, 
and alternative sourcing arrangements now make avail- 
able a variety of Latin American and European produce. 

The Consumer Electronics Division contributed 
pre-tax profits of £3.9m on turnover of £38.3m. Vestel 
strengthened its position in the market with an 
extended and updated product range as well as Its own- 
brand products. Reduction in unit costs means wide 
scope for export potential and a small range or products 
are already being exported to Europe and the Middle 
East whilst similar opportunities elsewhere are being 
explored. At Russell Hobbs Tower progress has been 

I 1 ** Textile Division recorded pre-tax profits or 
£1.7m on turnover of £29 An. Particularly enroarasine 
progress was made by Santana In tire t’SA. and Shui 
Bing and Impact in the Far East. This included the 
acquisition by Shui Hing of 51 per cent of a Portuguese 
company, Agoli. * 

In the Pharmaceuticals, ^ Toiletries and Cosmetics 

Division progress made In the development of 
new projects Including the formation of a joint-venture 
yjjp “ TJ irke >' 10 dls lribulc consumer products 
frjra Tbe Mcome Foundation. The associate company, 
ft^ij Koxmetik, successful* launched its range of 
L’Oreal cosmetics and toiletries. * 

The International development of the Group is 
Mnhnuingmosi satisfactorily'. In the USA a sponsored 
American Depository Rceeipt programme hosbera 
established with The Bank of New York and in thTkr 
East, subject to official consents, the Group has 
feereased its shareholding in Shui Ring t 0 66 percent 

The Group views the future with 'confidence 


Financial Times Thursday May 21 1987 

Color oil confident after 
66% increase to £10m 

A RISE of 66 per. cent to 
£l0.38nz in pre-tax profits 
reported by Coloroll Group, the 
fast expanding manufacturer of 
wallcoverings, household 

textiles and ceramics, for the 
year to March 31 1987. This is 
well in line with markg expecta- 

Mr John Ashcroft, chairman 
and chief executive, said 1988 
should, be another year of sig- 
nificant progress. 

He said the acquisition of 
Crown House— not included in 
the past year’s results— was now 
unconditional, and assimilation 
of the tableware division was 
proceeding rapidly. 

The company already had a 
number of companies interested 
in acquiring the engineering 
division and expected to dispose 
of it in the coming months. 

Currently, \ group . turnover 
on a proforma basis was now 
almost £4 50m. 

Many of the changes in 2987 
were brought about by acquisi- 
tions, notably Staffordshire 
Potteries, Fogarty and in the 
US; Wall co. All the companies 
acquired had been completely 
integrated into company’s home 
fashion divisional structure. 

Major capital expenditure 
projects bad' been authorised 
for each acquisition, and 
several were already substan- 
tially under way. 

Commenting on the progress 
of the various divisions, Mr 

. John Ashcroft, riialniran «wl 

chief executive of Colo rail 
Ashcroft said that Wallcover- 
ings UK sales increased by 48 
per cent reflecting the Worley 
acquisition for a full year 
(three months in the preceding 
year), as well as strong under- 
lying sales growth. Profits in- 
creased by a satisfactory 27 per 

Home furnishing sales and 
profits substantially more than 
doubled and included the busi- 
ness of Drew for 10 months, 
and Fogarty for two months. 
Both businesses were fully 
integrated and significant 
margin improvements were 
being achieved. 

In ceramics, rationalisation of 
file acquisitions of Bitterns, 
Staffordshire Potteries and 
Cartwright and Edwards was 
now complete.Significant profit- 
ability improvements had been 
attained, with good prospects 
for the future. 

Sales of wallcoverings in the 
US increased by 28 per cent in 
dollar terms (23. per cent in 
sterling), reflecting continued 
strong growth in new products 
and the inclusion of W allmatee 
for a full year compared with 
U months. 

Packaging sales increased by 
5 per cent and the divison again 
achieved very satisfactory profit 
margins while in ret ailing , the 
opening of the new flagship 
store in London's Regent Street 
had been exceptionally well 
received, although results were 
adversely affected by start-op 

Sales in Australia increased 
notwithstanding a serious ware- 
house fire early in the year. 

Total sales last year rose from 
£60.83m to £115.23m; tax 
charged was £3.61m (£2.4m) 
and minorities took nil 
(£183,000), as did extraordinary 
costs (£242,000 in 1985-86). 

Earnings per share were up 
from I3.4p (restated) to ISfip 
and the dividend is raised from 
5p to 5.75p with a proposed final 
of 8.45p (3p). 

See Lex 


by 28 % 

Parkland Textile (Holdings) 
raised its pre-tax profit by 
28 per cent in the year ended 
February 27 1987, from £ 1.22m 
to £1.57m, gaining substantial 
benefit from reduced borrow- 

The group, manufacturer of 
woollen yarn, worsted doth and 
clothing, produced a turnover 
of £53.4m (£54-3m). 

A highlight of the year, said 
Mr Barry Spencer, chairman, 
was a £3.4m reduction in 
borrowings to £3m by Feb- 
ruary 27, largely brought about 
by substantial stock reductions. 
Interest charges were cut from 
£985,000 to mifiOO. 

The worsted weaving yarn 
business of Smith Buhner was 
sold as it needed substantial 
capital investment The yarn 
production was retained and 
would be developed to maintain 
the group's “fast flow” capa- 
bilities, Mr Spencer said. 

As to the current year he 
disclosed that all sections were 
operating at higher levels than 
last year. He was confident 
that the year would show sub- 
stantially improved results. 

In clothing, development 
costs in men’s trousers and 
women swear companies held 
bade the division from TwaVfag 
the return on assets expected. 

RHM marginally above force 


Banks Hovis MeDougaH, the 
flour milling and baking group 
which last month won a £28 lm 
contested bid for Welsh food 
group Avana, yesterday unveiled 
a 31.5 per cent increase in half- 
year profits at £52 .9m before 

Ranks said the improvement 
was spread across all continuing 
businesses, adding that a strong 
start had been made in the 
second half. "I would expect 
the year as a whole to be 
another satisfactory one,” says 
chairman Sir Peter Reynolds. 
The first half profit figure is 
marginally above the level pre- 
dicted by RHM during the 
Avana bid, but the interim divi- 
dend— 25 per cent higher at 
2.65p — is exactly as forecast. 

The Avana acquisition was 
completed six weeks into the 
current half, so has no bearing 
on the figures. Yesterday, com- 
menting on the acquisition. 
Ranks said it was “ basically 
pleased " with what it had 
found so far. The Welsh com- 
pany is still being run as a 
separate entity, with main board 
director, Mr Tim Howden, 
taking charge and Avana’s 
former chairman. Dr John 
Randall, still assisting in the 
transitional period. Ranks 
added yesterday that no decision 
has yet been taken over Avana’s 
previous plan to open a £2Sm 
food park at Dragon pare, 
Merthyr Tydfil. 

At the trading level, profits 
rose from £45. 8m to £57.6m on 

sales of £742.3m (£698.2m). 
The largest advance was seen 
in the milling and bread baking 
division, which contributed 
£19.9 jh (£15.3m), helped by the 
launch of a number of new 
products. Elsewhere, there was 
steady growth in groceries (up 
14.4 per cent to £X0.3m) and 
a £1.8m addition from the 
general foods side, to £6 - 2 m 

• comment 

Having forecast £52. 5m in the 
course of its Avana bid. Ranks 
can hardly have expected — and 
certainly did not engender — 
much surprise in response to 
yesterday's figures. All eyes, 
however, are now on the Good- 
man Fielder stake, which has 
been built back up to 15 per 

cent since the Avana merger 
(with New Zealand group, 
Fletcher Challenge, holding 
another 4.5 per cent.) RHM 
can probably give thanks to 
the New Zealand authorities 

who have blocked the 
Goodman - Wattie merger, 
forcing Goodman into an appeal 
and at least delaying the expan- 
sion of its asset base. One seg’ 
gestior. amongst analysts is that 
Goodman might consider some 
deal with RHM in return for 
‘•sanatisiog" it; stake. But if 
profits, including four and a 
half months of Avana, reach 
£110-£li5m this year, the pros- 
pective PE with the shares 
down 4p at 317p is around 14 — 
and that does not look exces- 
sive, all things considered. 

Reduced home markets hit Irish Distillers 

A CONTRACTION in the home 
market adversely affected 
profits at Dublin-based Irish 
Distillers Group in the six 
months to March 31 1987, and 
the pretax figures were down 
from I£7.67m to I£5.73m. 

Turnover was down from 
£13 4.49m (which included ten 
months* trading of United 
Drug) to £117. 81m. 

Apart from the smaller home 
market, Mr Joseph McCabe, the 
chairman, said reduced Cooler 
shipments to Australia, and 

weaker sterling and dollar ex- 
change rates, also contributed 
to the lower profits. 

He said the decline in con- 
sumption in spirits in its home 
market, evident in the second 
half of last year, bad continued, 
leading to a fall of 6 per cent 
in duty payments in the open- 
ing half. 

Exports, other than to the 
US, were up, and its European 
markets, in particular, per- 
formed well and responded to 
the marketing investment being 


West Coast Cooler continued 
to be brand leader in the 
Australian market Sales there, 
however, were static rather 
than increased, and a necessary 
inventory adjustment by the 
group's franchises gave rise to 
a consequent sharp reduction of 
shipments in the period. Ship- 
ments will resume during the 
second half, but at a lower level 
than in the same period of 

Mr McCabe said he expected 

the group to make positive pro- 
gress in the second half but. in 
the prevailing circumstances, it 
would be u wise w make a pre- 
diction of the outcome for the 
full year. The reduction in 
domestic interest rates 
the Budget, and the recent 
strengthening of sterling will 
have a favourable effect, ho 

The interim dividend is un- 
changed at 2p. Stated earning 
per 25p share wore down from 
9.33p to 

Acatos & Hutcheson 

interim profits up 
73% to £6.3m 

Hutcheson, chairman of Acatos 
& Hutcheson, in his last annual 
report is borne out by the half- 
year results to March 29, 1987, 
with pre-tax profits showing a 
rise of 73 per cent from £3.63m 
to £6 226m. The shares closed 
23p higher at 382p. 

In yesterday’* interim state- 
ment Mr Hutcheson anticipated 
full year results in line with 
the improvement shown over 
the past six months. He said 
that due to lower raw material 
prices— -the group’s principal 
activities are processing and 
marketing of edible- oil pro- 
ducts — turnover, expressed in 
cash terms, had declined but 
volume turnover had increased 

The company was continuing 
to examine further potential 
acquisitions in the UK and had 
also formed a subsidiary hold- 
ing company in Spain which 
provided a suitable platform for 
the development core activities 
in that area. 

The decline in turnover for 
the period was from £106.49m 
to £97.95m; operating profit 
was up from £4.89zn to £6. 71m 
while net Interest payable was 
down sharply to £447,000 from 
£ 1.26m. Tax took £2.29m 
(£ 1.37m) leaving earnings per 
share to emerge at 13.1 d (8.6p) 
for the dividend which is 

raised 50 per cent to 3p. 

• comment 

The progress of Acatos & 
Hutcheson’s price since the 
company’s flotation at 160p last 
August makes Rolls-Royce’s 
debut look positively pedestrian: 
yesterday AfidTs shares bucked 
the smiting market and put on 
another 5 Op to 409p as the 73 
per cent interim profits increase 
triggered an all-round up-grad- 
ing of full-year forecasts. The 
market in A&H is so tight that 
it does not take many fans to 
put the price up, but even so, 
the disbelief that dogged the 
company's flotation is rapidly 
being dissipated by the perform- 
ance. The advance Js-being led 
by the consolidation of acquisi- 
tions through greater, pro- 
duction efficiency, so enabling 
AAH to . increase volume 
through the seizure of market 
share. This process will con- 
tinue into next year, when the 
new plant at Orchard Place will 
also allow the group to throw 
50,000 tonnes of margarine a 
year at the importers’ 20 per 
cent share of the market. With 
£ 12 m in sight tills year, the 
prospective p/e of 16 is already 
looking into 1988, big it may 
yet prove conservative unless 
exchange rates swing violently j 
out of A&H*s favour. 





The Annual General Meeting of Sun Alliance 
and London Insurance pic was held yesterday at 
the Head Office of the Company in Bartholomew 
Lane, London E.C.2. 

Mr. H. U- A. Lambert, the Chairman, 

presided and in addressing the Meeting stated- 

“As you will know, we do not publish quarterly 
results but it is our practice at the Annual General 
Meeting to give shareholders an indication of our 
experience in the first quarter. I would again 
caution that the estimated results for one quarter 
alone do not provide a reliable guide to the likely 
outcome for the full year. 

for the thud successive year, as I reported in 
my Statement, our home results have been badly 
af fected by severe winter conditions and, including 
the windstorm in March, the total weath er cla ims 
are estimated to have cost over £75M compared 
with £41M last year. Although the impact of these 
weather losses has resulted in a somewhat larger 
underwriting loss than for the first quarter in 1986 
the underlying improvement has continued. 

There have also been encouraging improve- 
ments in the results from a number of overseas 

Investment income and life profits have again 
shown good growth and overall, in contrast to 
1986, die first quarter has, l am pleased to say, 
produced asmatt pre-taxprofit” 

A Vote of Thanks to the Chairman, Directors 
and Staff was proposed by Mr. Evelyn de 

British Airways Pic 

announces pre-tax profits 

£162 million. 




- . ; 



Turnover ' 



Airline Operating Surplus 

1st 6 months 



2nd 6 months 



Total for Year 



Profit Before Taxation 



Profit after tax 



Extraordinary items 



Profits available for distribution 



Dividends payable (1986 £0.4m) 



Transferred to Reserves 



Earnings per share 



A s stated in die Offer for Sale its Dnectou will pay a dividend of 4.116p per share on 31287 to shareholders regist er ed on 1 1 June 
NOTES The foDowiag specific points should be noted: 

□ 1 Theatrfineoperadngsnrpltsfbrl986/87)s,afierdiaigjn{;£16mfbrseveranae l asinular^uretotbeprioryeai: 

□ 2. The cost of die pubis: share offer amourued to£llm ot~ which £]0ra had been provided in pnor yens. 

□ 3. There is a C or por atio n Tax ehaigcoo the probe* for die year of£43tn. This has been offset by £25«n of AC l previously paid and written 
off and a provision of £15m which was made in 1984/85 as a resulc of the transfer of staff co the new pension scheme. This results in a net 
ehai^e for die >car of £3m- In addition £11 m has been provided for deferred tax. 

The oiof>e Ailment of results does not comprise dte foil accounts. Copies of ihefoll accounts for the year aided 31 March 1986 have been, and those for tie 
year ended 31 March 1987 uri fl be, pled with the Registrar of Co mpani es. T he auditors haif issued unqualified audit reports on the accounts for both yean. 

Commentary on 1986/87 

The volume of scheduled airline traffic in 1986/87 
increased over that for the previous year by 1.5% in 
terms of passengers and was unchanged in Revenue 
Passenger Kilometres. The incidents in Chernobyl 
and Libya had serious adverse effects on traffic during 
die early summer months. Following a variety of 
marketing initiatives, business recovered in late 
summer and this trend continued in the rest of die 
year. Cargo measured in Revenue Tonne Kilometres 
increased by 7.0%. 

Passenger load factor was 67% compared with 68% 
a year ago. Yields are Htrie changed from 1985/86. 
Overall airline revenue increased by 1% from £2795m 

The Airline Operating Surplus fell from £205m to 
£183m and pre-tax profits from £195m to £162m. 
However this is £17m higher than the forecast in the 
Offer for Sale issued in January 1987. In the last three 
months of the year fuel prices were lower and traffic 
carried -was hi ghe r than included in the forecast. 
Fuel prices have been lower throughout the year and 
the total cost in sterling amounted to £371m com- 
pared to £570m in the previous yean Staff costs have 
increased from £638m to £722m principally due to 
higher pay rates and overtime. Staff numbers however 
increased by 1% and productivity was maintained. 
Operating lease costs increased from £61m to £86m 
du e to additional Boeing 747 and 757 aircraft. 

The staff profit sharing plan will pay out just under 
two weeks. 

During the year net loan repayments amounted to 
£65m. With die strengthening of sterling, borrowings 
reduced by £17m and now stand at £2 97m. Net 
worth (share capital and reserves) is now £605m 
including £122m transferred to Reserves from the 
current year and the debt:equity ratio is 33:67 
compared with 44:56. 

The Future 

British Airways today is one of the more efficient, 
profitable and successful airlines in the world. Our 
standard of customer service is high, and our growing 
financial strength, combined with our newly won 
independence, gives us the opportunity to exploit for 
the first time the full potential of the company. 
Nevertheless, let me add a note of warning. While 
British Airways holds an enviable place in the front 
:of the world’s international airlines, we see a need 
a much greater understanding: in Britain of the 
Ie of competition that we face from the United 
States, European and Far Eastern airlines. 

If we are to maintain and increase our strength — and 
it is in the interests of die country and our customers, 
as well as of the company, that we should do so— then 
we must ensure that there are no externally imposed 
restrictions on our growth. We look to the future with 
confidence provided we are allowed to operate in an 
environment of free and fair competition. 

j . King of Wartnaby. Chairman 

Hie tonal General Meeting wtU be bdd » tfce Royal Albeit Hall on 39 June 1987. Tie Direcots 
Repeat and toeowiB wiD be postal a durehoidco m eariy Jane. For Amber infbnnaaoo please comur 
hweaoc Rdaricsa, Briub Airways Pie, £22% PO Bern K, Heathrow Airport, Hounslow TW6 3A. 

British Airways 

Britain’s highest flying company. 


Financial Times Thursday JW « JJS7 


Stefan Wagstyl on the Grace/Berisford merger plan 

Cocoa industry under pressure 

THE ANNOUNCEMENT of a UK which do some cocoa- grindings has risen from 21 per 
possible merger of tlie cocoa- grinding themselves and buy cent in 1966-75 to 52 per cent 
processing interests of W. G. die rest of their needs from the last year, mainly at the expense 
Grace, the US conglomerate, independent processors. of US processors. Western 

and S. & W. Berisford, the Bri- The processors have to per- Europe, particularly the Xether- 
tish commodity trader, is the form a tricky balancing act. lands and West Germany, has 
latest and most important sign They buy cocoa beans from pro- maintained a strong position 
of the financial pressures on ducers, m ai nl y in West Africa, with 37 per cent of last year's 
the industry. in a commodity market where output. 

A union between the two P ri “s are volatile But they Meanwhile, dull prices have 
companies, which would create JJaXet^whe^f 1,51 commodity traders after 

around less abruptly. As a 
result, profit margins can vary 
wildly from one year to the 

It is therefore hardly surpris- 

^ ing that several processing com- J2S 

The impact on the .industry panies are owned ^ conjmodity £“"£* ° f , a company which 

would aiaost certainly be trading companies which are “ as su “ e - e “- 
greater than the effect on either active in the futures markets, Finally, and most impor- 

buying and selling cocoa to try tantly, the independent proces- 
to square their books and cover sors have been squeezed by the 
their awn in-house stocks. growth of the chocolate com- 

Berisford is a prime example panies which have been able to 
of a trade-cum-processor. wring better and better terms 

Life has been difficult in the from their suppliers. 

1980s for the processors. First, 
cocoa consumption has been 
growing only modestly. Gill & 

Duff us, a London trader, esti- 
mates that 1.823m tonnes were 

the biggest cocoa-processing 
group in the Western world, 
would be the largest example 
so far of the consolidation which 
is talcing place in a fragmented 

the boom of the late 1970s. 
Lower trading profits, and in 
some cases losses, have made 
some groups think again about 
the wisdom of processing. 
Berisford is again a prime 

Grace or Berisford, which 
emphasise that talks are at an 
early stage. Each has serious 
difficulties of its own and cocoa- 
processing is a relatively small 
contributor to each company's 

Cocoa-processing companies 
grind cocoa beans and separate 
them into cocoa butter, for 
chocolate making, and cocoa 

powder, which is used in choco- ground last year, compared with 

late drinks, ice-cream and 

The market is dominated by 
the international chocolate com- 
panies. led by Mars and Hershey 
of the US. Nestle of Switzerland, 
and Cadbury Schweppes of the 

an average of 1.44m in the 10 
years to 1975. But there has 
been no shortage of grinding 
capacity because several pro- 
ducing countries have invested 
in plants. 

The producers' share of 

Merger after merger has 
transformed the once-frag- 
mented chocolate industry. 
Hershey's purchase of Nabisco's 
Canadian chocolate interests is 
a recent example, as is the 
acquisition of the Belgian com- 
pany Cote d’Or by Jacob 
Su chard of Switzerland. 

The chocolate companies have 
also turned on the Independent 
processors — Suchard has bought 

van Houten, of Holland, and has 
bought a sake in E D and F 
Man, the London trader. 

In this context, a merger 
between Grace’s and BerisforcTs 
interests, bringing together 
180,000 tonnes of grinding capa- 
city, would be as important 
defensive move. 

Berisford, whieh saw profits 
rise ISO per cent to £148xn pre- 
tax in the year to last Septem- 
ber. tried and failed to sell 
British Sugar, Its refining com- 
pany, for £425m to Ferruzzi, 
the Italian food company, when 
the Government blocked the 
bid. There is constant specula- 
tion in the City about how 
Berisford might deal with its 
£6Q0m debt, more than 40 per 
cent bigger than shareholders’ 
funds. Associated British 
Foods, which bought a 23.7 per 
cent stake in Berisford from 
Ferruzzi, mig ht w ell influence 
the group's future. 

Grace is in the throes of sell- 
ing businesses in retail, 
restaurants and agricultural 
chemicals, which account for 
almost half Its turnover, in 
order to concentrate on 
specialty chemicals, and 
resources. The group lost 
5375m last year as a result of 
charges arising from this drastic 

EC faun 
iprfce talks 

US 6 leverage 9 trade studied 

By Tim Dickson in Brussels 
last night suspended their 
crucial farm price talks until 
Sunday, though without much 
sign that any of the major 
issues are dose to being 

Three days of negotiations in 
Brussels have yielded progress 
on some of the less substantial 
items but West German oppo- 
sition to all ideas to change the 
system of “ green ” currencies 
and monetary compensatory 
amounts remains strong while 
Britain, Holland and the 
Germans are among those con- 
tinuing to block the Commis- 
sion’s controversial proposal 
for an oils and fats tax. 

West Germany and Ireland 
are deeply unhappy about a 
Belgian Presidency plan to 
limit the intervention system